In a row of Modi government's radical reform process a most expected reform to come next is change of financial year from 1st of April to 1st of January. Modi government has taken many bold moves like scrapping of Planning Commission and demonetization and merger of Rail Budget with Common Budget so there is a huge probability that Modi Government will come up with this kind of revolutionary change when this idea has backing of many elite assemblies of economist, administrator and social thinkers.
Chamberlain Commission (1913),Sir Dinshaw Wacha Commission (1921) under British Government, 1st Administrative Reform Commission (1966), LK Jha Commitee (1984), C.Rangarajan (2011, Planning Commission) all have favored the idea of changing India Financial Year.
In west countries 25 march is celebrated as Lady Day, on this day angle Gabriel informed Virgin Mary that she would be the mother of Jesus Christ. This date is also close to equinox so it marked as the division of the fiscal year therefore in west 1st of April was celebrated as new year for psychological and cultural reasons. From 1867 British Raj made first of April new financial year to align India's budgeting system with their budgeting system in England. Indian constitution's article 112 says president will lay annual financial statment before Parliament every financial year but there is no clause which define financial year rather article 370 (1) says to refer general clause act 1897 for interpretation of financial year. Means that can require a constitutional amendment. Where not having majority in Rajya Sabha could be a hurdle in that process.
Recently Modi government had set up a high level commitee headed by Shankar Acharya (former Chief Economic Advisor) to examine feasibility of shifting financial year to January 1st. The committee has submitted its final report to Finance Minister. It has given various merits and demerits of change of financial year and its effect on the different agricultural crop period and its impact on business, taxation system and procedure, statics and data collection. Change of financial year will help to align tax collection and Budget Estimate with actual receipt and expenditure. It will also help to account for impact of monsoon and other socio economic aspects of India for better planning and resource allocation especially for transforming ruler India.
In present budget making process we use last year's monsoon data which is nearly 8 month old so it doesn't give correct projection of next year's tax collection and expenditures. Generally all Multi National Companies maintain their annual reports from 1st January but in India they have to maintain another records from 1st April also in alignment with government financial year so this change would be considered as one more step towards ease of doing business in India. Bibek Debroy member of NITI Aayog has aslo favored following the calender year as financial year. It remains to be seen that with how much conviction Modi Government go on implementation of this idea but one thing is very clear that Modi ji has done every thing to look different than previous Government which was infamous for not taking decision. So if you think that your business will be affected by this change (if it takes place) get yourself ready for next Modi move.
