In India, the Financial Year (FY) is a concept that impacts everyone—from salaried employees to multinational corporations. It’s the official period for calculating income, expenses, and taxes. In simple terms, a fiscal year or financial year is the 12-month period in which a person or business earns income, keeps accounts, and prepares reports for tax purposes.
For example, income earned from April 1, 2022, to March 31, 2023, will be considered part of the Financial Year 2022–23. This period is crucial because it determines your taxable income, your filing deadlines, and the assessment year in which your taxes are actually calculated.
In other countries, the fiscal year can vary, but in India, the government follows the 12-month period between 1 April and 31 March without exception.
Definition of a Financial Year (FY)
A Financial Year (FY) is essentially a 12-month accounting period that a business uses for financial and tax reporting purposes. It can also be defined as a fiscal year (FY) that is a 52- or 53-week or 12-month period used by governments, businesses, and individuals to record income and expenses.
For individuals, it represents a 12-month period in which a person obtains income for tax purposes—whether from salary, business, investments, or other sources. For companies, it’s the official accounting period during which all profits, losses, and transactions are recorded and reported."
Why the Financial Year Runs from April to March in India
Many people wonder why India doesn’t follow the January–December model like the calendar year. The choice of 1 April to 31 March dates back to colonial times, aligning with the British taxation system. It was retained post-independence because it aligned well with agricultural cycles, monsoon patterns, and revenue collection schedules.
This system allows the government to:
- Plan the Union Budget in February and implement changes from April.
- Ensure tax adjustments and policy changes take effect at the start of the 12-month accounting period.
- Provide a stable structure for both business reporting and personal tax compliance.
Financial Year vs Assessment Year
While the financial year is when you earn your income, the assessment year (AY) is when the income is assessed and taxed.
For instance:
- Financial Year (FY) 2022–23: Income earned from April 1, 2022, to March 31, 2023.
- Assessment Year (AY) 2023–24: Period from April 1, 2023, to March 31, 2024, when you file returns for income earned in FY 2022–23.
This distinction is important for tax filing, as you always file your returns in the AY following the FY.
Also Read: Form 16: Everything You Need to Know About Your Salary TDS Certificate
Importance of the Financial Year for Individuals
For individual taxpayers, the financial year affects:
- Tax planning – Deciding when to invest for deductions under sections like 80C, 80D, etc.
- TDS calculation – Employers deduct tax monthly based on projected annual income.
- ITR filing – Returns must be filed in the assessment year following the financial year.
If you’re salaried, your Form 16 will always be issued for a specific FY. For example, if you worked in FY 2022–23, your employer issues Form 16 for that period, and you file taxes in AY 2023–24.
Importance of the Financial Year for Businesses
For businesses, the fiscal year determines:
- Profit and loss calculation – Revenue, expenses, and net income are recorded for the FY.
- Tax computation – Corporate taxes are calculated based on profits for the FY.
- Statutory filings – Companies must file annual returns, GST filings, and income tax returns based on the FY.
- Budgeting and forecasting – Financial years provide a standard timeframe for setting financial goals.
Different Countries, Different Financial Years
While India uses the April–March model, other countries have different fiscal year formats:
- USA: October 1 to September 30 (federal government) or January–December for most individuals.
- UK: April 6 to April 5.
- Australia: July 1 to June 30.
Some countries use a 52- or 53-week accounting period instead of a strict calendar-based system.
Key Compliance Dates in the Indian Financial Year
For FY 2022–23 (income from April 1, 2022, to March 31, 2023):
- Advance tax deadlines: Quarterly installments due in June, September, December, and March.
- TDS deposit dates: Monthly or quarterly, depending on type.
- ITR filing due date (non-audit cases): September 15 of the assessment year 2025-26.
- Audit report submission: Usually by September 30 of the assessment year.
Missing these deadlines can lead to interest, penalties, or even legal consequences.
Impact of Financial Year on Investments and Deductions
Many tax-saving investments, like ELSS mutual funds, life insurance, and PPF contributions, are tied to the financial year. If you want your investment to qualify for a deduction in a given FY, you must make it before March 31. This is why March often sees a rush in financial activity.
Also Read: CBDT Extends Due Date of Filing ITRs from July 31 to September 15, 2025
How Businesses Use the Financial Year for Reporting
A business’s 12-month accounting period that a business uses for financial and tax reporting purposes includes:
- Preparing balance sheets and profit & loss statements.
- Filing GST returns for the respective FY.
- Maintaining proper records for compliance with the Companies Act and Income Tax Act.
- Planning for upcoming fiscal policies announced in the Union Budget."
Conclusion
Understanding the Financial Year (FY) is essential for proper tax planning, compliance, and business management. Whether you are an employee, investor, or entrepreneur, knowing the exact period—the 12-month period between 1 April and 31 March—helps you plan deductions, file returns on time, and align your finances with legal requirements.
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