By Ruma Dubey

News of another new change is doing the rounds – change in the fiscal year. This is as big as demonetization. And we can only hope and pray that this does not happen now, bang in the middle of India trying to cope with the biggest tax reform going on stream, GST. Coping with GST and a change in the fiscal year from March-April to Jan-Dec could lead to a complete breakdown.

We currently have the 1^st April to 31^st March as the fiscal year ending. Last year, the Finance Ministry had set up a committee under Shankar Acharya, a former Chief Economic Adviser to the Finance Ministry, to examine the desirability and the feasibility of a new financial year. The idea being mooted is to change it to 1^st January to 31^st December. The committee now seems to be certain that this could be a good move.

Why this change now? Two reasons. Firstly, this fiscal year that we follow is a relic of the British era and maybe the idea is to away from that past. It was way back in 1867, that the British set India’s financial year from April to March, to align it with its own fiscal cycle.  We have been following it quietly for the past over 150 years.  The British followed the accounting period of April to March after they decided to adopt the Gregorian calendar system of accounting. It was the East India Company which first brought in this fiscal and once the British established their rule in India, naturally, all companies started following the same. Other “British colonies” which follow the same accounting year ending are South Africa, Hong Kong, Jamaica, Burma, Singapore and Canada also follow the same. There are some 33 countries around the world, which follow the same April to March fiscal.

Ironically, the UK itself has a weird date – their fiscal begins on 6^th April and ends on 5^th April. USA too does not have a Jan-Dec fiscal; its accounting year begins on 1^st Oct and ends on 30^th Sept and that of Australia begins on 1^st June and ends on 31^st July.

Secondly, world over, some 156 countries follow the Jan-Dec year or calendar year ending pattern and this move is thus being mooted to get us more aligned to the international norms than being just ‘Britain’ aligned.

The Govt feels that making it Jan-Dec will help the Budget and policy making decisions much easier and more importantly, it will coincide correctly with the harvest and sowing seasons. Even the effect of monsoon can be dealt with more effectively when the fiscal begins early on and not just a quarter ago.

But this change is sure to bring about major changes. First and foremost will be the taxation. The filing will now begin in the Sept-Dec quarter as all taxes have to be filed and results announced for the year by companies before 31^st Dec ends. It also means that the Budget will no longer happen in February but could be changed to October once the calendar year ending is/if adopted.

This will bring a huge shift in the way society itself behaves. This last quarter is typically the peak festive season with Ganpati, Navratri, Diwali and then Christmas holidays. This is the time when there are maximum ‘bank holidays’ and typically families take off for winter vacation. All that will change. New year’s eve will be about closing the books, right into the wee hours of the new year.

It will involve a lot of administrative change, the way banks work, the way CAs work. Everything will undergo a huge change.

It will also mean that we will start depositing our PPF, insurance premiums and do all the tax saving investments before Dec itself. Yes, it will be a huge shift in habits. This 31^st March ending is so well ingrained into our psyche and routine that any change there will be a huge adjustment.

Any change is painful and our first reaction is to resist. This change too will be painful but it’s a good idea to align ourselves globally.