Govt. Plans to have New Financial Year from ‘January to December’ instead of ‘April to March’
A. Financial year change from ‘Apr-Mar’ to ‘Jan-Dec’ on Hold
Reportedly, Government’s plan to change the cycle of financial year from ‘April-March’ to ‘January-December’ has been put on hold and may not materialise in the near future as concurrence for such change is pending from many States, which are in review mode. Further, Government is studying the report of “Dr. Shankar Acharya Committee” which has been entrusted with reviewing benefits and implications of such change.
India has aligned with system of having April-March financial year since 1867, during the British Rule, whereas most of the developed nations follow calendar year as the Financial Year.
B. Govt. Committee to Review Desirability and Feasibility of Financial Year (April-March)
The Government of India has constituted a Committee to examine the desirability and feasibility of having a ‘new financial year’. The Committee headed by Dr. Shankar Acharya (former Chief Economic Adviser) has Shri K.M. Chandrasekhar (former Cabinet Secretary), Shri P.V. Rajaraman (former Finance Secretary, Tamil Nadu) and Dr. Rajiv Kumar (Senior Fellow, Centre for Policy Research) as other Members. The Committee will examine the merits and demerits of various dates for the commencement of the financial year including the existing date (April to March), taking into account the various relevant factors. The Committee has been given time till 31 st December, 2016 to submit its Report.
Terms of Reference (ToR) of the Committee
Examine the merits and demerits of various dates for the commencement of the financial year including the existing date, taking into account, inter-alia, the following:
(i) The genesis of the current financial year and the studies made in the past on the desirability of change in financial year;
(ii) The suitability of the financial year from the point of view of –
a. correct estimation of receipts and expenditure of Central and State Governments;
b. the effect of the different agricultural crop periods;
c. the relationship of financial year to the working season;
d. impact on businesses;
e. taxation systems and procedures;
f. statistics and data collection;
g. the convenience of the legislatures for transacting budget work; and
h. other relevant matters.
The Committee may, after due examination of all relevant factors, recommend the date of commencement of the financial year which in its view is the most suitable for the country.
In case a change in the financial year is recommended, the Committee may also work out the modalities for effecting the change. This would inter-alia include:
(i) appropriate timing of change;
(ii) the determination of a transitional period;
(iii) the change in tax laws during the transitional period;
(iv) the amendments that may be required in various statutes; and
(v) changes in the coverage of the recommendations of the Finance Commission.
The Committee may interact with experts, institutions, Government Departments and others as deemed necessary. The Committee is expected to soon convene its first meeting.