Fiscal Year

Definition:

A fiscal year is a one-year period that insurance companies apply for financial reporting and budgeting. In common, a fiscal year is used for accounting purposes to work out the financial statement.

Description:

A fiscal year in insurance companies in India starts from 1st April to 31st March. This is the period in which income is earned over insurance policies. A fiscal year does not necessarily correspond to the calendar year.

Organisations can choose their fiscal year as per their convenience. This can be further broken down into four quarters (each with three months). The major purpose of the fiscal year is to compute the financial accounting. Apart from accounting, the fiscal year is also for financial reporting.

Fiscal year allows the companies to reduce their tax burden by spreading the income and expenses over the same period/cycles.

Example:

A life insurance company did a total business of Rs.75 cores over a fiscal year starting from 1st April to 31st March. The total profits was Rs.50 crores and the remaining was the sales expenditures, administration charges, and claims expenses.

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ADV/5/22-23/290