What Is a Financial Year?

The financial year, or FY, is the twelve-month period used for accounts and income. In India it starts on 1 April and ends on 31 March of the next year. For example, a year starting in April of one year and ending in March of the next is written using both years.

The assessment year, or AY, is the year after the FY, in which the income earned during the FY is assessed. People often mix up the two. If you are asked for the AY on a form, it is usually one year ahead of the FY in which you earned the income.

The April to March cycle has been followed in India for a long time and is used by the government, companies and banks. Many other countries use different accounting years, so do not be surprised if international documents follow another calendar.

Listed companies report quarterly results based on the FY: April to June, July to September, October to December and January to March. Annual results cover the full FY.

Our page on earnings per share explains one figure from these results.

Fund houses and registrars can provide statements for any period, but capital gains statements are typically prepared year by year, which helps when you or your tax adviser prepare filings.

Our page on the capital gains statement explains how to get one.

Salaried employees receive documents from their employer covering salary and deductions for the year. Keep these with your other yearly records. Your tax adviser will need them.

Many people rush to make investments in the last weeks of March. Decisions made in a hurry are often poor ones. Planning through the year avoids last-minute choices you may regret. We do not offer tax services, and we suggest discussing tax matters with a qualified professional well before March.

The end of March is a natural moment to review your finances: net worth, goals, SIP amounts, nominees and records. Some people prefer to do it around Diwali or New Year; what matters is doing it once a year.

Our post on the yearly money checklist lists what to look at.

1. Download statements for all investments.
2. Update your net worth.
3. Check nominees and contact details.
4. Review SIP amounts against goals.
5. Collect documents your tax adviser needs.
6. Plan SIP increases for the new year.

Our page on calculating net worth explains the second step.

April is often when salary increments take effect. It is a good time to raise SIPs before the extra money gets absorbed by spending.

Our page on step-up SIP explains how.

Businesses close their books for each FY, prepare accounts and file returns. Personal and business records should be kept separately for each FY.

Our page on investing as a business owner explains separating business and personal money.

The Union Budget, usually presented in February, sets out government plans for the coming year. Markets often react to budget announcements, but long-term investors rarely need to change plans because of them.

Our page on GDP and the stock market explains why short-term reactions fade.

Create a folder for each year with statements, salary documents, investment confirmations and receipts. When questions come up later, you will find everything quickly.

Our page on the consolidated account statement explains how to see all mutual fund holdings in one document.

It is wise to keep financial records for several years, as questions about past years can arise. Your tax adviser can tell you how long specific documents should be kept.

While accounts follow the FY, many families find it easier to plan goals by calendar year or by occasions like Diwali. Use whichever cycle you will actually stick to for reviews.

Our page on goal-based investing explains how to track goals.

• Mixing up FY and AY on forms.
• Assuming statements follow the calendar year.
• Leaving all money decisions to March.
• Not keeping year-wise records.

Dividing the year into quarters helps with money habits too. Many people do a short check every three months: are SIPs running, is the emergency fund intact, are any bills or renewals coming up? A quick quarterly look makes the yearly review much easier.

If you receive IDCW payouts from mutual funds, they appear in your statements with dates. Keeping year-wise records helps you and your tax adviser when filings are due.

Our page on growth versus IDCW explains payout options.

Rather than making big investment decisions at the end of March, spread them across the year with regular SIPs. This avoids rushed choices and smooths out market ups and downs.

Our page on SIP autopay explains how to automate them.

Choose one weekend near the end of March each year as your family money day. Gather statements, update the tracker and talk about goals for the coming year. A regular ritual makes it far easier to keep finances organised.

• FY: 1 April to 31 March.
• AY: the year after the FY.
• Statements and results often follow the FY.
• Review yearly and avoid the March rush.

We are distributors rather than investment advisers and we do not offer tax services. If you need help collecting mutual fund statements for the year, get in touch.