Now companies in india should have uniform financial year – Companies act 2013

One of the most important amendments that new Companies act 2013 has brought in compare to Companies Act 1956 is to have a uniform financial year.

Section 2(41) of companies act 2013 has very clearly defined the term financial year. This amendment to Companies act 2013 has brought in to align with the provisions of Income tax act.

As per section 2(41) of Companies Act 2013, in relation to any company or body corporate, means the period ending on the 31st day of march every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of march of the following year, in respect whereof financial statement of the company or body corporate is made up.

uniform financial year should end on 31st march - companies act 2013

This means, a private or public company’s financial year should start from 1st of April to 31st march. If it’s a newly incorporated company then we have to look into the date of incorporation.

If incorporation date is before 1st January then financial year ends on coming 31st march otherwise it will be the period ending on 31st day of march of the following year.

For instance, if a company is incorporated on 2nd January 2015 then financial year as per section 2(41) would be starting from 2nd January 2015 to 31st march 2016.

Instead of 2nd January 2014, if its incorporated on 28th December 2014 then financial year will be starting from 28th December 2014 to 31st march 2015.

Section 2(41) further specified that if a company or body corporate is a holding or subsidiary of a foreign company and for this reason they are required to follow a different financial year for consolidation of its accounts outside India then tribunal if satisfied, may allow any other period as the company’s financial year, whether or not that period is a year.

Companies or body corporate which existing at the commencement of Companies Act 2013, shall comply with this section within a period of 2 years from such commencement and align with the new financial year ending of the 31st day of march.

Companies incorporate after 1st January can consider following year’s 31st march as their complete financial year and thereafter they can take financial year starting from 1st April to 31st march.

Due to this amendment, several large Indian companies like HCL technologies and Ranbaxy Laboratories have to adjust their financial year.

Multinational companies like Nestle India, Ambuja cements, Bosch, Glaxo Smithline, Thomas Cook, Siemens, Proctoer and Gamble  are also required to comply with this provision for their India based companies.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.