SHORT SUMMARY
Under Indian corporate law, the financial year of a Company ordinarily runs from 1 April to 31 March. However, certain Companies, particularly Subsidiaries, Holding Companies, or entities requiring global alignment may need to adopt a different financial year.
Such change is not automatic and requires prior approval of the Central Government (Regional Director) in accordance with statutory provisions.
This article provides a comprehensive yet practical guide to the legal framework, procedural requirements, timelines, and compliance considerations for changing the financial year of a company.
LEGAL FRAMEWORK
Applicable Section
- Companies Act, 2013 - Section 2(41): Defines “ financial year ” Applicable Rule
- Rule 40 of the Companies (Incorporation) Rules, 2014
Delegation of Powers
The powers of the Central Government under Section 2(41) have been delegated to the Regional Directors (RDs). The application must be filed before the jurisdictional Regional Director.
Forms Involved
The following e-forms are required during the process:
1. e-Form RD-1 – Application for change in financial year
2. e-Form RD GNL-5 – For resubmission in case of defects or incomplete applications
3. Form INC-28 – Filing of RD Order with the Registrar of Companies (ROC)
STEP-BY-STEP PROCEDURE
STEP 1: Convene Board Meeting & Pass Resolution
The process begins with internal corporate approval.
- Convene a duly constituted Board Meeting.
- Pass a Board Resolution approving the proposed change in the financial year.
- Clearly record:
- Grounds and justification for change
- Votes cast in favour and against
STEP 2: Filing of Application with Regional Director
File e-Form RD-1 along with prescribed fees.
Mandatory Attachments:
- Detailed grounds and reasons for change
- Certified copy of Board Resolution and minutes
- Power of Attorney / Memorandum of Appearance (if applicable)
- Details of any similar application filed within the last five years and its outcome
STEP 3: Resubmission in Case of Defects
If the Regional Director identifies deficiencies:
- The applicant must resubmit through e-Form RD
- Resubmission must be made within 15 days
- Maximum two resubmissions are permitted
Failure to rectify defects within the permitted timeline may result in rejection.
STEP 4: Approval or Rejection by Regional Director
The Regional Director shall:
- Approve or reject the application within 30 days from:
- Initial filing, or
- Last resubmission (whichever is later)
If deficiencies remain unrectified, the application may be rejected with recorded reasons.
Deemed Approval
If no order is passed within 30 days, the application is deemed to have been approved.
This provision ensures procedural certainty and prevents administrative delays from affecting corporate operations.
STEP 5: Post-Approval Compliance with Registrar
Upon receipt of approval:
- File the RD Order in Form INC-28 with ROC.
- Filing must be done within 30 days of receipt.
- Pay applicable fees as per the Companies (Registration Offices and Fees) Rules, 2014
Only upon filing of INC-28 does the change become fully effective in ROC records.
Key Compliance Considerations
Boards and management should carefully evaluate:
- Alignment with group companies or foreign parent entities
- Impact on taxation and advance tax planning
- Statutory audit timelines
- Consolidation and reporting efficiencies
- Compliance with FEMA or other regulatory frameworks (if applicable)
Importantly, change in financial year should not be used as a tool to avoid statutory liabilities or regulatory compliance.
CONCLUSION
Changing a Company's financial year is a strategic corporate decision that may offer benefits such as:
- Global reporting alignment
- Improved financial consolidation
- Tax planning efficiencies
- Streamlined governance and audit processes
However, the process demands strict adherence to statutory requirements under the Companies Act, 2013 and related rules.
FREQUENTLY ASKED QUESTIONS (FAQ)
Can the financial year be changed back once it has been amended?
Yes, a company can change its financial year back to the original period or to a new period. However, it requires the approval of the Regional Director through the same process as outlined above. There are no specific restrictions on changing the financial year multiple times, but each change must be supported by valid reasons and comply with statutory regulations.
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