Financial Year (FY) and Assessment Year (A.Y)

Most people file Income Tax Returns through Chartered Accountants or Financial planners but if anyone wants to file their own they need to understand two commonly used terms while filling return i.e. Financial Year & Assessment Year.

Financial Year

It simply means the year in which the income is earned. The financial year starts on 1 April and ends on 31 March. The financial year is denoted as FY. For the purpose of Income-tax, the financial year is sometimes called as Previous Year as it is the year preceding to the assessment year.

Assessment Year

The “assessment year” means the period of twelve months commencing on the 1st day of April every year. It simply means the year in which the income earned is assessed and taxed. The assessment year also starts the same as the financial year. Return of income of the financial year is filed in the assessment year. The assessment year is denoted as AY. The assessment year is the year immediately following the financial year.

Examples of the Financial Year & Assessment Year

Period of which income is earned Financial Year Assessment Year
1 April 2022 – 31 March 2023 2022-23 2023-24
1 April 2021 – 31 March 2022 2021-22 2022-23
1 April 2020 – 31 March 2021 2020-21 2021-22
1 April 2019 – 31 March 2020 2019-20 2020-21
1 April 2018 – 31 March 2019 2018-19 2019-20
1 April 2017 – 31 March 2018 2017-18 2018-19
1 April 2016 – 31 March 2017 2016-17 2017-18
1 April 2015 – 31 March 2016 2015-16 2016-17
1 April 2014 – 31 March 2015 2014-15 2015-16
1 April 2018 – 31 March 2019 2018-19 2019-20

Important Points Related to Assessment Year & Financial Year

  • Salary income is one of the main exceptions. It applies to all incomes except some specified incomes like salary income. In salary income tax is paid even before the income comes to your hand. Such tax deduction is called Tax Deducted at Source (TDS). Advance tax is a different concept from TDS. In these exceptional cases tax is paid in the same year in which you earn the income i.e. financial year.
  • Normally, the tax is always paid after the completion of the Financial year for all other incomes.
  • The due dates for filing income tax returns for the financial year are 31 July/ 30 Sept of the Assessment year. Therefore if the income tax returns are being filed for the financial year 2021-22, the due date for filing the income tax returns would be 31 July 2022/ 30 Sept 2022 and so on.
  • ITR form has Assessment Years because income for any particular financial year is evaluated and taxed during the assessment year. Income cannot be taxed before it is earned, that’s why it is evaluated and taxed after the end of the financial year. Hence, taxpayers have to select AY while filing their income tax returns.
  • In case the return is filed within the due date but with the wrong AY then it can be corrected by filing a revised return under section 139(5) of the income tax act. The previous filed or original return will be held void. Revised ITR with correct AY will be held valid.

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