Financial Year

A financial year is a fixed 12-month accounting period that businesses, governments, and individuals use to record, monitor, and report financial transactions. It serves as the formal time frame for preparing financial statements, filing taxes, auditing accounts, and evaluating financial performance.

In India, the standard financial year runs from:
April 1st to March 31st of the following year.
For example, FY 2024–25 spans from 1 April 2024 to 31 March 2025.

Why a Financial Year is Important

1. Taxation and Compliance

• Income tax is calculated based on income earned during the financial year.

• Businesses must file income tax returns, GST returns, and other regulatory reports for the FY.

• Governments use the FY to estimate revenues and create budgets.

2. Financial Reporting

• Companies prepare key financial statements annually, such as:

  • Balance Sheet

  • Profit and Loss Statement

  • Cash Flow Statement

• These help stakeholders assess financial health and performance.

3. Budgeting & Planning

• Organizations prepare budgets aligned with the FY.

• Performance targets, resource allocation, and strategic plans are evaluated yearly.

4. Auditing

• Internal and statutory audits are conducted for the completed FY to ensure accuracy, compliance, and transparency.

Common Terms Linked with Financial Year

Example

If a company earns revenue and incurs expenses between April 1, 2024 and March 31, 2025, all these transactions are recorded under Financial Year 2024–25. Taxes on this income will be filed in Assessment Year 2025–26.