Why financial year is different from calendar year?

Every financial year starts on April 1 and ends on the March 31. Do you know why the financial year is taken from April to March? Although the exact reason for why the Financial Year starts from April 1 and ends on March 31 is unknown

There are a few reasons why this financial (fiscal) year and calendar year do not coincide

Inheritance from British rule

There are few countries that follow this system like India, United Kingdom, Canada, New Zealand, Hong Kong and Japan. If you look closely at these Countries, they are Britain and its colonies and the practice has continued. More importantly looking at the history of UK, prior to 1752 the UK still adhered to the Julian calendar and the first day of a new year was 25th March. The calendar reforms of that year brought the country into line with the Gregorian calendar on the continent by removing 11 days from September and starting the year on 1st Jan. To avoid messing up their accounts with short or long years the financial institutions kept the start of the fiscal year where it was i.e. 25th March but shifted by 11 days to 5th April. Over the years this decision seemed to make sense as it avoided the Christmas & New Year's holiday. So that accounting year doesn't coincide with the periods of high activity/sales, such as Christmas and New Year. Moreover no wants to pore over the books on New Year's Eve.

Agricultural country

You have to go back to sixth/ or seventh financial commission chaired by K. Brahmananda Reddy, former Chief Minister of undivided Andhra Pradesh and former Home Minister in Indira Gandhi Government. Before the 1960's you could choose when to close your books. That finance commission recommended that taking into account the of the fact that Indian Economy is mainly dependent on the monsoons, we could assess the performance of the economy better if we adopted a uniform closure of books of account after the two monsoons, namely the Southeastern monsoon that occurs between July and October and Northwestern monsoon that occurs between October and January have passed and the crop yields assessed. Thus March, 31 was chosen as the date by which full impact of the economy could be ascertained. Hence we adopted a uniform book closure date of March, 31 and April 1.

Taxation rules

India enacted the Income-Tax Act in 1961. The Act came into force from April 1, 1962 and that's why our financial year begins on April 1 every year.

Regional New Year

April 1st coincided with the Hindi festival of Vaisakha / Ugadi / Bihu i.e. Hindi New Year, so the East India Company in Bengal decided to synchronize its financial year with the Hindi calendar to ease financial transactions.