A fiscal year is a 12-month period used by businesses and governments for accounting, budgeting, and financial reporting. It serves as a reference period for tracking financial performance, filing taxes, and planning future investments. Understanding the fiscal year is crucial for both individuals and organisations to manage finances effectively.
What is the fiscal year in India?
In India, the fiscal year (FY) runs from April 1 to March 31 of the following year. It is the period used for calculating annual income, preparing financial statements, and filing income tax returns. Companies, government entities, and individuals follow this period for accounting and taxation purposes.
Fiscal year vs. calendar year: key differences
| Aspect | Fiscal year (India) | Calendar year |
|---|---|---|
| Duration | April 1 – March 31 | January 1 – December 31 |
| Purpose | Accounting and taxation | General time measurement |
| Tax filing | Follows FY for income calculation | Not used for tax filing |
| Applicability | Businesses, individuals, government | Individuals only |
Why is the fiscal year important in India?
The fiscal year is critical for accurate financial management and tax compliance.
Key reasons:
- Provides a standard accounting period for businesses and government
- Helps in filing taxes accurately
- Assists in tracking revenues, expenses, and profits over 12 months
- Supports budgeting, forecasting, and strategic planning
- Enables comparison of financial performance year-on-year
Key dates of the Indian fiscal year
Certain dates within the fiscal year are significant for tax and financial compliance.
Important dates:
- April 1: Start of the fiscal year
- June 30: Deadline for certain corporate filings
- September 30: Quarter-end for businesses
- December 31: Mid-year review of financials
- March 31: End of fiscal year; preparation of financial statements and tax filings
Financial year (FY) vs. assessment year (AY)
| Aspect | Financial year (FY) | Assessment year (AY) |
|---|---|---|
| Definition | Year in which income is earned | Year following FY in which income is assessed and taxed |
| Duration | April 1 – March 31 | April 1 – March 31 (next year) |
| Tax filing | Calculates income earned | Tax returns filed and assessed |
How businesses use the fiscal year: strategy and reporting
Businesses rely on the fiscal year for operational and strategic purposes.
Uses include:
- Preparing annual financial statements and balance sheets
- Planning budgets, investments, and expansion strategies
- Analysing quarterly and annual performance metrics
- Aligning business planning with regulatory and tax requirements
- Managing cash flow and liquidity
Check your business loan eligibility to plan financing in sync with your fiscal year strategy and business expansion goals.
Fiscal year for tax planning: deadlines and considerations
Proper understanding of the fiscal year helps in tax planning and compliance.
Pointers:
- Determine income and expenses accurately for FY calculation
- File advance tax and quarterly returns according to deadlines
- Consider deductions, exemptions, and credits for tax optimisation
- Plan major financial decisions, such as investments or business loan applications, in alignment with the fiscal year
- Monitor changes in government regulations affecting FY and AY
Common fiscal year structures for global businesses
Different countries and global companies may follow fiscal years that differ from the Indian FY.
Common structures:
- April–March: Used by India, UK government for budget planning
- January–December: Standard calendar year adopted by many corporations worldwide
- July–June: Some companies in Australia and other regions follow this cycle
- October–September: Certain corporations and government agencies adopt this period for internal reporting
Check your pre-approved business loan offer to plan international or multi-period financial operations efficiently.
Conclusion
The fiscal year in India is essential for accurate accounting, taxation, and business strategy. By understanding its structure, key dates, and differences from the calendar year, businesses and individuals can manage finances effectively. External funding options like a business loan, considering business loan interest rate can further help in aligning financial planning with the fiscal year for growth and expansion.
