What is financial year end?
In India, the government’s financial year runs from 1 April to 31 March. It is abbreviated as FY17. Companies following the Indian Depositary Receipt (IDR) are given freedom to choose their financial year. For example, Standard Charterer’s IDR follows the UK calendar despite being listed in India. Companies following Indian fiscal year get to know their economical health on 31 March of every Indian financial or fiscal year. The current fiscal year was adopted by the colonial British government in 1867 to align India’s financial year with that of the British Empire. Prior to 1867, India followed a fiscal year that ran from 1 May to 30 April.
A fiscal year (or financial year, or sometimes budget year) is the period used by governments for accounting and budget purposes, which vary between countries. It is also used for financial reporting by business and other organizations. Laws in many jurisdictions require company financial reports to be prepared and published on a generally annual basis, but generally do not require that the reporting period be calendar year, 1 January to 31 December. Taxation laws generally require accounting records to be maintained and taxes calculated on an annual basis, which usually corresponds to the fiscal year used for government purposes.
Steps to be taken for the financial year end
- Review Progress toward Your Financial Goals
Meet with your advisor to review changes in the market this year and determine whether or not these changes may have caused your asset allocation to be out of alignment with your goals. Adjust your portfolio, as necessary, to ensure your investments still support your plan.
Share life changes — such as a marriage, divorce, birth or adoption, job promotion, or retirement — with your advisor to determine how these changes can impact your financial situation. Make adjustments to your plan, as necessary.
- Maximize Your Retirement Plan Contributions
Review your retirement plan contributions and consider maximizing them before year-end. Take advantage of catch-up contributions in your IRA and employer-sponsored accounts, if you are age 50 or older and your plan allows.
- Take Your Required Minimum Distribution (RMD)
Take your RMD if you’re 70-1/2 or older and are subject to RMDs. Beginning at this age, the IRS requires you to start taking money out of your Traditional, Rollover, SEP, or SIMPLE IRA(s). Talk to your advisor to determine the proper amount.
- Conduct a Year-End Tax Review
Request a year-end tax projection from your tax advisor if you earned a sizeable bonus or had an exceptionally good year in your business. Talk to your advisor about any portfolio losses to see if there is an opportunity to offset gains and potentially reduce your tax liability.
- Make Charitable Contributions
Make desired charitable contributions if you plan to itemize deductions on your 2015 tax return. Be sure you have the appropriate receipts or documentation for your tax records.
- Create or Review Your Estate Plan
Create an estate plan, if you don’t have one, to ensure your wishes are carried out should something happen to you. Update your estate plan if you’ve had a major life change such as a marriage, divorce, death of a beneficiary, or birth or adoption of a child. Revisit your estate plan if you’ve moved to another state, as different states’ estate laws may have an impact on your plan.
Ensure your assets (e.g., your home or car) are properly titled to aid in a smooth transition. Make desired annual gifts to family members.
- Review Your Insurance
Review your insurance coverage as family circumstances — such as kids graduating from college or your assuming responsibility for an aging parent — change your financial responsibilities. Now may be the time to talk about disability, long-term care, or life insurance coverage.
Request an insurance review to see if you are underinsured or overpaying for insurance coverage, or if there are better options more suitable for your needs.
- Deplete Your Flexible Spending Account (FSA)
Review your FSA plan’s list of eligible expenses and rules around funds left in the account at the end of the year. Many accounts have use-it-or-lose-it policies, while others allow a $500 annual rollover. Understand your plan’s rules and maximize your benefits.
- Review Your Beneficiaries and Contact Information
Ensure the beneficiaries on your retirement accounts and insurance policies are up-to-date.Update your contact information — email addresses, mailing address, and phone numbers — with your key providers.
- Shred or Store Documents
Once a year, go through physical file folders to determine which documents containing sensitive information — such as canceled checks, pay stubs, credit card statements, and debit card and ATM receipts — need to be saved three years to meet IRS requirements and which others can be cleaned out and shredded. Store important documents — such as birth certificates, marriage licenses, Social Security cards, passports, estate-planning documents, a list of online passwords and accounts, wills, and insurance policies — in a safe deposit box or fireproof home safe.
What are the consequences if the necessary steps are not taken for the financial year end?
The most competitors report on a calendar-year basis (or any other standard for your industry) then some will see it as a disadvantage to report on a different cycle, especially if it’s later than your competitors.
- If the financial goals are not satisfied then the life after retirement, marriage, and divorce will be pathetic and it will affect the standard of living.
- If the steps are not efficiently taken care at the time of financial year end then the filing of tax will be delayed and a quite high penalty will be charged.
How the demonetization did affected the financial year end?
- The GDP growth rate has held up at more than 7%.
- Foreign direct investment went up significantly during the year. (It rose 30% on a year-on-year basis to $21.6 billion between April and September 2016, according to publicdata published by the India Brand Equity Foundation, a government-sponsored trust.)
- Initiatives such as the ‘Make in India’ program “have borne early fruits.” Many MNCs including Panasonic and Pepsi set up manufacturing facilities in India during the year.
- Since Rs500 and Rs1000 notes make up some 86% of the total currency in circulation in India, especially in the vast rural areas, one economist compared the pain to what individuals might experience if 86% of their blood was removed from their bodies.
- Output will be affected as spending has stopped, manufacturing hit and several workers laid off. The net result can be a fall of between 0.5% and 2% in GDP
- Several measures have been introduced, among them a 0.75% discount on digital payments made for buying petrol and diesel and a 0.5% cut in the price of railway season tickets bought using digital technology.
- After demonetization, only 24 lakh (2.4 million) Indians acknowledge an annual income of Rs. 10 lakh each (Rs. 1 million).
- There is a tough to strengthen the tax machinery sufficiently to force those people to start paying taxes
- Over the last 10-12 years, the demonetized currency was being used in the black economy, and that excess cash in the system caused inflation to spike and fueled corruption and Lack of cash causes difficulty, but excess of cash is even more troublesome
- Commenting about the demonetization the flow of money as it drastically affects the business cycles quickly.
In relation to demonetization and GST the absent some of these spillovers, the long-term impact of the demonetization could be quite positive for the Indian economy.
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Written By – “Seema Padmanabhan”