Change in fiscal year cycle unlikely before 2018

An immediate change in the fiscal year cycle from April 1 to January 1 will not be possible and the move will have to be put off to at least 2018.

“There is absolutely no time for such a massive change as of now. The report will be reviewed and even if a decision is taken to shift the fiscal year, it will require a lot of preparations,” said an official.

Apart from an overhaul of the government accounting systems and further advancement of the Budget, the tax return filing deadline would have to be changed. The Income-Tax Act and the Company’s Act will have to be amended to reflect the modified timelines.

A committee led by former Chief Economic Adviser Shankar Acharya to examine the “desirability and feasibility” of having a new financial year has submitted its report to the Finance Ministry.

“We have submitted the report,” Acharya told BusinessLine but declined to give any details of the recommendations. “It is up to the Finance Ministry to make the report public.”

As of now, only an announcement outlining the recommendations of the report is expected in the Union Budget 2017-18 that will be presented in early February.

However, the government could choose to implement the report, given that earlier, NITI Aayog Member Bibek Debroy too had suggested moving to a calendar year cycle.

While noting that making January 1 the start of the financial year could help in better policy planning, most economists believed that the change would not cause much disruption.

“The advancement of the Budget by another two to three months will not be an issue. The shift of the fiscal year would primarily help with farm sector where in by kharif, there is an idea of the monsoon pattern. Comparatively, industrial activity is much easier to predict,” said M Govinda Rao, Advisor, Deloitte and Chief Economic Adviser, Brickwork Ratings.

Govind Rao, who was also a member of the Fourteenth Finance Commission, said it would be more convenient as it would also help in comparisons of official growth projections with those of international agencies that use the calendar year.

However, for companies and individuals, a switch in the fiscal year may not mean much of a change except for advancement in their tax filing deadlines by a few months, said DK Pant, Chief Economist, India Ratings.

“Listed companies announce quarterly results while small unlisted firms do an annual audit. Apart from changing the tax return filing timeline, it will mean only a one time disruption when accounts for only nine months would be prepared,” he said.

The British had set India’s financial year from April to March in 1867, to coincide with their own cycle. In 1984, the LK Jha committee had recommended that the financial year should start from January mainly with reference to the impact of South-West monsoon on the economy.

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