A panel constituted to examine the feasibility of changing the starting date of financial year (FY) in India has recommended continuance of the current April-March format, as a change could lead to avoidable “uncertainties” without much gain, said sources.
“The advancement of the Budget date (from end-February to February 1) has already addressed the issue of expenditure getting delayed (after vote on account and all, the real spending under a Budget used to get delayed to June-July). So, no need to change the FY for that,” said a person with direct knowledge of the panel’s recommendation.
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The four-member panel headed by former chief economic adviser Shankar Acharya submitted its report in late December. “Besides the government, almost all Indian companies and banks follow an April-March financial year. Even Indian multinational companies with substantial global exposure, or having a major part of their revenue coming from overseas sales, have conveyed to the panel that they have no problem with the current system,” the source quoted above said. The panel is also of the view that monsoon impact on the economy is on the wane and expenditure required to tackle a bad monsoon is not very high. “Adoption of Ind-AS accounting standards and goods and service tax next year also make continuation of the financial year desirable,” the person said.
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After the introduction of Ind-AS for all companies with a net worth equal to or above Rs 500 crore from the start of this financial year, the new globally-compliant accounting norm will be extended to unlisted firms with a net worth of Rs 250 crore or above and all listed firms from April 1, 2017. Companies have made preparations keeping in mind the current FY system.
One alternative to ‘April-March’ was ‘January-December’, which is followed by many major economies in the world.