The financial year in India is a period of 12 months during which the government and businesses prepare their financial statements.
The financial year in India starts on April 1st and ends on March 31st of the following year. It is also known as the fiscal year or assessment year.
The concept of a financial year is important in India as it helps individuals and businesses plan their finances and stay compliant with tax laws.
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Coming back to Financial Year in India. The financial year in India is divided into two parts: the assessment year and the previous year. The assessment year is the year in which the income earned in the previous year is assessed for tax purposes.
For example, the assessment year for the financial year 2021-2022 would be 2022-2023. The previous year is the year in which the income was earned. For example, the previous year for the financial year 2021-2022 would be 2021.
The financial year in India plays a crucial role in the taxation system. The Income Tax Act of India requires individuals and businesses to file their income tax returns (ITR) based on the financial year.
The deadline for filing ITR is usually July 31st of the assessment year. For example, the deadline for filing ITR for the financial year 2021-2022 would be July 31st, 2023.
The financial year in India also plays a crucial role in the budgeting process of the government. The government of India presents its annual budget on the last working day of February of the financial year.
For example, the budget for the financial year 2021-2022 would be presented on February 28th, 2022. The budget outlines the government’s revenue and expenditure for the upcoming financial year.
The financial year in India is also important for businesses as it helps them to plan their finances and stay compliant with tax laws. Businesses are required to maintain proper financial records and prepare financial statements for the financial year.
These financial statements include the balance sheet, income statement, and cash flow statement. The financial statements are used to determine the financial health of a business and to make important business decisions.
The concept of a financial year is also important for individuals as it helps them to plan their finances and stay compliant with tax laws.
Individuals are required to file their income tax returns for the financial year in which they earned the income. The income tax returns must be filed by July 31st of the assessment year. The
income tax returns are used to determine the tax liability of an individual and to claim tax refunds if applicable.
Why does the financial year start on 1 Jan?
The financial year in India starts on April 1st, rather than January 1st, due to historical and practical reasons. Historically, the Indian financial year was aligned with the agricultural calendar and the fiscal year used to start on April 1st.
This was because the majority of the country’s population were farmers, and the fiscal year starting on April 1st allowed the government to align its financial year with the agricultural cycle and collect taxes on agricultural income at the start of the farming season.
Another reason for the Indian financial year starting on April 1st is practicality. The Indian government and businesses need time to finalize their accounts, prepare their financial statements and file their income tax returns for the previous year.
By starting the financial year on April 1st, the government and businesses have an additional three months to complete these tasks.
Additionally, the Indian financial year starting on April 1st also aligns with the end of the Indian fiscal calendar, the end of the fiscal year for the government of India is on 31st March of every year.
This allows the government to have a complete picture of the financials of the country, and this helps in making better policies and budgeting for the next year.
Furthermore, the Indian financial year starting on April 1st also aligns with the end of the financial year of many other countries, which facilitates ease of trade and commerce.
India has trade relations with many countries and starting the financial year on April 1st aligns with the financial year of many other countries, making it easier to conduct trade with them.
In conclusion, the financial year in India starts on April 1st due to historical and practical reasons. Historically, it was aligned with the agricultural calendar and the fiscal year used to start on April 1st.
Practically, starting the financial year on April 1st allows the government and businesses additional time to finalize their accounts, prepare their financial statements, and file their income tax returns.
Additionally, it also aligns with the end of the Indian fiscal calendar and the financial year of many other countries, which facilitates ease of trade and commerce.
The financial year in India is a period of 12 months that starts on April 1st and ends on March 31st of the following year.
It is also known as the fiscal year or assessment year. The financial year in India plays a crucial role in the taxation system, the budgeting process of the government, and the financial planning of individuals and businesses. It helps them to plan their finances, stay compliant with tax laws, and make important financial decisions.
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