“A change in the financial year would be best signalled by an advancement of the presentation of the Union Budget, which would also make sure that the government’s financial year planning is in tune with the new cycle”, said a senior government official.
There is, however, no clarity yet on whether advancing the Union Budget presentation date to early January would pave the way for the switchover to the proposed financial year cycle of January-December from next year. For that to happen, the Union Budget needs to be presented in December. It is, therefore, likely that the target date for launching the new financial year cycle could be January 2019.
The Union government is aware that the experts committee, headed by former chief economic advisor, Shankar N Acharya, had not favoured a change in the current financial year cycle. While the committee’s views are still being examined, the government has begun seeking different views on the issue as its mind is inclined towards a change. Prime Minister Narendra Modi had asked chief ministers of states at a meeting of NITI Aayog that they should examine the idea of a financial year change and make suggestions to the Centre on how this can be implemented.
An ideal situation would be where the state governments also switch over to a January-December financial year cycle, according to the sources. But if the Centre adopts the January-December cycle, states too would have to fall in line. Hence, an attempt is being made to secure the consent of the states to the financial year change.
A change in the government’s financial year will also affect the various dates of tax payments by individuals and corporations. The modalities of such changes are yet to be worked out.
No farm tax for now
Even though NITI Aayog’s view on taxation of agricultural income kicked up a controversy, the Union government is in no mood to consider levying income tax on farmers irrespective of their relative income levels.
A paper produced by a NITI Aayog member had suggested that income tax on farmers could be considered. It has been clarified later that such a view is not shared by NITI Aayog. The chief economic advisor in the finance ministry has suggested that if a tax on farmers has to be considered, the states must do so as the Constitution allows only states to levy such a tax.
The government view on taxing farmers is that such an idea is not under consideration and it cannot possibly be examined before the general elections in 2019. A tax on farmers could be politically exploited by the Opposition political parties and can be a political liability for the ruling party during the next general elections. At present, barring plantation companies, no other segment of farm income is taxed either at by the Centre or by any state.