Why not change financial year 2019-20 from 12 months to 21 Months: A new approach for the new emerging India
The present business scenario is already going through a tough time. It’s not only the slowdown in the economy or lack of demand or liquidity crunch or outbreak of new pandemic COVID-2019 but also the negative sentiments which is affecting all. Job sectors, industrial environment & service sector.
None of it is showing an optimistic outlook.
Everything needs a strong boost. All that is needed is a out of box thinking. Financial stimulus can give slight movement but what is needed is a change in the mindset and approach. A total change in the business sentiments is needed for turning India to a 5 trillion economy.
Under the present scenario, where compliances are more than the business, the situation needs to be handled more carefully & more systematically. Enough mess up has been done by the present approach of various administrators in the country. Sorry to say, GST could have resulted in much better sentiments but its poor implementation (sorry to be straightforward) could have been more smoother & better.
Recently, Hon’ble Finance Minister has very aptly & timely relieved the taxpayer from compliance burden of March 2020 by extending it to June 2020. An extention of 3 months – What does it mean? Simple, all the march ending work will be deferred till June – 2020. Government proactiveness in handling the present situation of COVID 2019 by all means need to be appreciated. Let us be honest in appreciating in the direct connect with the citizens of the country. We couldnot have any better person as PM than respected Shri Narendra ji Modi.
Undeniably, COVID 2019 is going to take more time to normalize. And after it is normalized, businessmen will again be required to concentrate enough on the compliance burden. Along with the compliances of FY 2018-19, ongoing compliances of April, May, June, July and so on will further be there. It will be further coupled with the annual income tax return, GST annual return, banks renewal, other statutory compliances would be there which is sure to make the life of the taxpayers, tax officials, tax professionals a bit more difficult. Just imagine the scenario of the business after a period of 3 months after normalization of COVID 2019 effect.
This is the time to convert a crisis in to an opportunity. There are lots of things which can be done. Let us begin with just one small step.
Why not change the financial year to December ending?
It was already in the agenda of every Government to align the financial year concept with the best prevailing international trend. Almost in majority of the countries, the financial year is the calendar year which begins from January and ends in December.
Whenever India decides to implement it (and sooner or later, it has to be done), it will be a 9 months closing so that the next financial year could be reckoned from January.
Here is a small suggestion which would not only reduce the compliance burden of the taxpayer but will also improve the sentiments of the taxpayers.
Let this be the financial year be of 21 months as against normal 12 months period.
That is, instead of closing the financial year of 12 months of 2019-20 (i.e., April 2019 to March 2020), let it financial year of 21 months of 2019-20 (i.e., April 2019 to December 2020).
The benefit is obvious.
- It will result in aligning it with the International standards which was already in the Government agenda since long.
- Two years compliances of the businessmen would be reduced to one year only. There will not be two compliances of return filing, reconciliation, etc but only one year compliances. Immediately after the effect of COVID is over, taxpayers would be fully able to concentrate on business rather than unending compliances.
- The crisis of coming 9 months due to COVID – 2019 would be compensated by the less compliance burden of otherwise 2020-21 (April-20 to March-21).
- Taxpayers will carry a positive sentiments (which is more important than finance if I say) as they may correctly think that the FY 2019-20 is without any compliance at their end.
- The benefit of double depreciation may be given to the businessmen. As a result, the 3 months reduction in financial year will be boon for them because of disruptions caused by COVID-19.
- Individual taxpayers may be given a relief of double the basic exemption limit, twice deduction towards depreciation, deduction u/s 80C, 80D, Housing loan interest etc.
- The budgetary allocation is already going to witness the sea change as a result of various stimulus package already announced and to be announced in the coming days. The new budget to change the financial year would be more better in view of changed scenario.
- The GST Council is already taking efforts to remove all the glitches in the present return filing system. Failure in smooth implementation of GST is not hidden from anyone. In all probability, it appears that the GST glitches will be removed by the GST council in next 2-3 meetings.
In short, New financial year commencing from January 2021can be indeed a totally new year free from all the complications occurring in the current financial year. The announcement of shifting the 12 months financial year for the current year to 21 months would be one of the biggest positive sentiments itself in the economy.
Of-course, time is short to make the announcements. But, the best brain of the country can come out with the best solutions in a week’s time at the most.
Let us hope that the financial year is changed from April 2019 – March 2020 to April 2019 – December – 2020.
Hope someone in the North Block is thinking on the same line.
