Why financial year starts from April 1 ? 2 min Read.

In India a period of 12 months starts from 1st April and ends on 31st March. The period in which the income is earned is known as the financial year. 

A financial year is a period of 12 months used by government, business or other organizations in order to calculate their budgets, profits and losses. This year is often used in business to compare with the calendar year. There are various reasons as to why financial year starts from April. Mention may be made of-

1.At the time of civilisation, globally it was agrarian economy mainly based on weather. So, crops were reaped in the month of March and sold. In the end of March, a country could calculate it's loss and gain and new process for cultivating new crop was started in April.Hence financial year started in the month of April and ended in March. 

2.The reason for financial year being from 1st April is that the British introduced this system in 1867 and continued to follow this. As a result they implemented this system in British ruled India also. Even Countries that were once ruled by British also follows the same like Hong Kong and Canada.

3.Another reason which paved way for financial year being started from April is that the month of November and December are considered as festive season due to the presence of various festivals . The inventory is very fast moving and the employees are also on leave which makes it difficult to close the books of accounts during this period. So, it was decided to choose April as the starting month of financial year.There is no formal and confirmed reason for the same.

Other countries with an April to March financial year

India is not the only country who follows this trend of April to March. There are other countries also follow a similar trend, and the list are:

• Canada
• United Kingdom (UK)
• New Zealand
• Hong Kong
• Japan

To conclude, a financial year is most commonly used for accounting purposes to prepare financial statements. The exact reason for why the financial, also called fiscal, year begins in April in India is not established. But these are some of the most commonly guessed causes. 

HOW DID YOU LIKE THE ARTICLE? DO GIVE IT A SHARE, BECAUSE EVERY SHARE MATTERS FOR US.