Let Tax2Win experts file your belated return & claim your TDS
- Simple
- Secure
- Smart
Learn everything about the assessment year and financial year, definition, comparison between assessment year and financial year.
Financial year and Assessment year are two very different and crucial terms that the taxpayers need to be familiar with. No communication will be made correctly if the assessment year or financial year has been wrongly referred to. Financial Year and Assessment Year have been ages old terms in Income Tax. Still, many taxpayers get confused between these two terms. Many assessees / taxpayers tend to presume both terms as one and the same thing & this leads to several problems while filing income tax returns. To help file the income tax return in a smooth & hassle-free manner, we will explain and solve all the queries of our readers related to the assessment year and financial year.
The financial year is the year in which you have earned the income. It starts from 1st April of the calendar year & ends on 31st March of the next calendar year. The term “Financial Year” is also commonly referred to as F.Y.
An assessee is required to calculate and plan taxes for the financial year but income tax return is to be filed in the next year or Assessment Year. For instance,
Assessment year means the year (from 1st April to 31st March) in which income earned by you in a particular financial year is taxed. You are required to file your income tax return in the relevant assessment year. Assessment year is the year just succeeding the Financial Year. For e.g.
For the purpose of income tax or income tax return, terms financial year and previous year are used interchangeably. So, the financial year (FY) 2020-21 can also be termed as the preceding (previous) year (PY) 2020-21 & the income of such year will become taxable in assessment year (AY) 2021-22.
Period | Financial Year | Previous Year | Assessment Year |
---|---|---|---|
1 April 2018 to 31st March 2019 | 2018-19 | 2018-19 | 2019-20 |
1 April 2019 to 31st March 2020 | 2019-20 | 2019-20 | 2020-21 |
1 April 2020 to 31st March 2021 | 2020-21 | 2020-21 | 2021-22 |
From the tax perspective, a Financial year is the year in which a person earns an income. Assessment year is the year followed by the financial year in which the evaluation of the previous year’s income is done, tax is paid on the same and ITR is filed.
For instance, if we consider the financial year starting from 1 April 2020 to 31 March 2021, then it is known to be Financial year 2020-21. The assessment year begins after the financial year ends, so the assessment year of F.Y 2020-21 would be AY 2021-22.
Income tax forms have an assessment year because the income for any financial year is evaluated and taxed in the following year i.e the assessment year. Income cannot be taxed before it is earned. There are adverse situations that can come up either in the beginning , middle or end of a financial year. Hence, it is made mandatory to select Assessment year while filing income tax returns.
As described above, income earned in a financial year becomes taxable in the assessment year. E.g.
In general most of the taxpayers use the term AY instead of the full form that is Assessment Year.
In general most of the taxpayers use the term FY instead of the full form that is Financial Year.
For Financial Year (FY) 2020-21, the Assessment Year (AY) 2021-22 will be applicable.
Yes, for the purpose of ITR filing, financial year and previous year mean the same. For eg, the Financial Year 2020-21 also means Previous Year 2020-21.
In the case of FY 2020-21, it is 31st March 2021. That means in India the Financial Year ends on every 31st March every year and the new financial year starts from the 1st April.
Financial Year 2020 or FY 2020-21 started from the 1st April 2020 and will end on 31st March 2021. The assessment year 2021 or AY 2021-22 shall be relevant to the taxpayers earning income in this financial year 2020-21.
Current assessment year (AY) is 2021-22 and is relevant for the financial year (FY) 2020-21.
Income cannot be taxed before it is earned. There are uncertain situations that can come up either in the beginning , middle or end of a financial year. Hence, it is made mandatory to select Assessment year while filing income tax returns. For example Income earned in the current Financial Year 2020-21 (i.e. from 1st April 2020 to 31st March 2021) will become taxable in Assessment Year 2021-22 and also income tax return is to be filed in Assessment Year 2021-22.
Let Tax2Win experts file your belated return & claim your TDS