What Is a Financial Year?
A financial year (FY), also called a fiscal year, is the 12-month period used by governments and organizations for accounting, budgeting, and tax purposes. In India, the financial year runs from 1 April to 31 March of the following year.
Why the Financial Year Matters for HR and Payroll
- All salary income, tax deductions (TDS), and statutory compliance filings are organized around the April-to-March financial year cycle.
- Employee investment declarations (for tax-saving instruments under Section 80C and others) and proof submission deadlines are structured around the financial year.
- Annual compensation review, appraisal, and bonus cycles in many Indian companies are aligned with the financial year, though some organizations use a calendar year cycle instead.
- Form 16 issuance and the resulting Assessment Year filing both reference the financial year in which salary was earned.
Financial Year vs Assessment Year vs Calendar Year
- Financial Year (1 April - 31 March): the period income is earned.
- Assessment Year (the following 1 April - 31 March): the period in which that income is assessed and tax returns are filed.
- Calendar Year (1 January - 31 December): a separate reference period sometimes used for company-specific processes like performance cycles, distinct from the statutory financial year.
Why Some Indian Companies Use Calendar Year Instead for HR Cycles
While statutory tax and compliance activities must follow the April-March financial year, individual companies have flexibility in choosing whether their internal HR processes — like the appraisal cycle or fiscal budget planning — follow the financial year or a calendar year, based on internal preference and global parent company alignment for multinational subsidiaries.
Financial Year: Frequently Asked Questions
Why does India's financial year start in April instead of January?
Is the financial year the same for all types of Indian entities?
This glossary entry is for general information and reflects common HR practice in India at the time of writing. Statutory thresholds, rates and deadlines change — verify against the latest official notifications or consult a qualified legal or tax advisor before acting.