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Assessment Year (AY) and Financial Year (FY) are two important terms in the context of income tax and financial planning. They are used to determine the taxation of an individual or entity's income.
No communication will be made correctly if the assessment or financial year has been wrongly referred to. Many assessees/taxpayers tend to presume both terms as 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 on the 1st of April of the calendar year & ends on the 31st of March of the next calendar year. The term “Financial Year” is also commonly referred to as F.Y. For example, the financial year 2023-24 started on April 1st, 2023, and will end on March 31, 2024.
An assessee is required to calculate and plan taxes for the financial year, but an 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 you earn in a particular financial year is taxed. You are required to file your income tax return in the relevant assessment year. The assessment year is the year just succeeding the Financial Year. E.g.,
| 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 |
| 1 April 2021 to 31st March 2022 | 2021-22 | 2021-22 | 2022-23 |
| 1 April 2022 to 31st March 2023 | 2022-23 | 2022-23 | 2023-24 |
From the tax perspective, a Financial year is a year in which a person earns an income. On the other hand, The assessment year is the year followed by the financial year in which the previous year’s income is evaluated, tax is paid on the same, and an Income tax Return (ITR) is filed.
For instance, if we consider the financial year from 1 April 2022 to 31 March 2023, it is known to be the Financial year 2022-23. The assessment year begins after the financial year ends, so the assessment year of FY 2022-23 would be AY 2023-24.
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. Adverse situations can come up either at the beginning, middle, or end of a financial year. Hence, it is made mandatory to select the Assessment year while filing income tax returns.
Don't miss the deadline for filing your Income Tax Returns! Tax2win makes it easy and convenient to file your ITR with the Upload Form 16 feature. You can also take the help of our expert assistance, which provides tax consultation services to help users understand their tax liabilities, deductions, and exemptions. This can be especially helpful for individuals or businesses with complex financial situations.
In general, most taxpayers use the term AY instead of the full form which is Assessment Year.
In general, most taxpayers use the term FY instead of the full form which is Financial Year.
For Financial Year (FY) 2022-23, the Assessment Year (AY) 2023-24 will be applicable.
Yes, for ITR filing, the financial year and previous year mean the same. E.g., the Financial Year 2022-23 also means the Previous Year 2022-23.
In the case of FY 2022-23, it is 31st March 2023. That means in India, the Financial Year ends on the 31st of March every year, and the new financial year starts on the 1st of April.
Financial Year 2022 or FY 2022-23 started on the 1st of April 2022 and will end on the 31st of March 2023. The assessment year 2023 or AY 2023-24 shall be relevant to the taxpayers earning income in this financial year 2022-23.
The current assessment year (AY) is 2023-24 and is relevant for the financial year (FY) 2022-23.
