A 'YEAR CHANGE' FOR CONVENIENCE
The talk of change in the “year” is once again doing the rounds.
This time around, its RBI – it wants to align its accounting year end, which follows the 1st June – 31st July cycle with the fiscal – 1st April – 31st March. Now, that’s a very reasonable recommendation as its essential for the apex bank to move along with the banks, companies, industries and everything that it basically financially governs upon. The RBI said that it was mainly to provide better estimates of the projected surplus transfers to the government for budgeting purposes.
So this change by RBI is being mooted mainly with the dividend and interim dividend distribution to the Govt. Currently, RBI gives interim dividends in February and final pay-outs in August currently.
It was last year that the Jalan panel had recommended change of accounting year. RBI''s current fiscal ends on June 30, 2020. Its FY 2020-21 will start on July 1, 2020 and be for nine months up to March 31, 2021. Thereafter, all FY will start on April 1 every year, aligned with the government.
And this need to change the year by RBI has once again brought to fore the need to align our fiscal year with the rest of world, which is 1st Jan to 31st Dec. This was mooted way back in 2016 but once the demonetization and GST took over, this idea was shelved as this change would have become unbearable, broken the industries completely.
But now with things slowly settling down though GST remains a work-in-progress, there are many who are asking why not align everything – RBI accounting and entire fiscal to the calendar year and get totally globally aligned.
The Govt feels that making it Jan-Dec will help the Budget and policy making decisions much easier and more importantly, it will coincide correctly with the harvest and sowing seasons. Even the effect of monsoon can be dealt with more effectively when the fiscal begins early on and not just a quarter ago.
But this change is sure to bring about major changes. First and foremost will be the taxation. The filing will now begin in the Sept-Dec quarter as all taxes have to be filed and results announced for the year by companies before 31st Dec ends.
This will bring a huge shift in the way society itself behaves. This last quarter is typically the peak festive season with Ganpati, Navratri, Diwali and then Christmas holidays. This is the time when there are maximum ‘bank holidays’ and typically families take off for winter vacation. All that will change. New year’s eve will be about closing the books, right into the wee hours of the new year.
It will involve a lot of administrative change, the way banks work, the way CAs work. Everything will undergo a huge change.
It will also mean that we will start depositing our PPF, insurance premiums and do all the tax saving investments before Dec itself. Yes, it will be a huge shift in habits. This 31st March ending is so well ingrained into our psyche and routine that any change there will be a huge adjustment.
Looking at the mayhem unleashed by the “two” tax filing, it is unlikely that the Govt will take the risk of rocking the boat any more, what with the state of the economy being the way it is. But RBI alignment will be a surety; after all it is all about getting the money from RBI before the fiscal closes.