Generally, a calendar year starts in January and ends in December. But why the Indian financial year starts on April 1 and ends on March 31. Still, the exact reason is known but experts suggest the following facts may be the reason.

British Method

Before the arrival of the British, Indians followed a different financial year. April to March financial year is the practice of the British and they followed the same in India. After independence, India continued the same method.

Agricultural country.

India is an agricultural country and most of the people are involved in agriculture. The main sources of income depend on the yield harvested in January, February, and March. So in March, the government get an idea of whether the revenue will increase or decrease.

Festival sales.

The important festivals of India like Diwali, Navratri, and Christmas come from October to December. These festivals impact huge sales on retailers and wholesalers. And there is very less time available for preparing accounting documents for a year in the festival time. Doing in hurry may reflect some error so to avoid this may be March is considered as year-end.

Income Tax Act.

Income Tax Act came into force on April 1, 1962. So April 1, could be followed as the first day of the financial year.

Generally, a calendar year starts in January and ends in December. But why the Indian financial year starts on April 1 and ends on March 31. Still, the exact reason is known but experts suggest the following facts may be the reason.

British Method

Before the arrival of the British, Indians followed a different financial year. April to March financial year is the practice of the British and they followed the same in India. After independence, India continued the same method.

Agricultural country.

India is an agricultural country and most of the people are involved in agriculture. The main sources of income depend on the yield harvested in January, February, and March. So in March, the government get an idea of whether the revenue will increase or decrease.

Festival sales.

The important festivals of India like Diwali, Navratri, and Christmas come from October to December. These festivals impact huge sales on retailers and wholesalers. And there is very less time available for preparing accounting documents for a year in the festival time. Doing in hurry may reflect some error so to avoid this may be March is considered as year-end.

Income Tax Act.

Income Tax Act came into force on April 1, 1962. So April 1, could be followed as the first day of the financial year.