As per the Income Tax law the income earned in current year is taxable in the next year. The year in which income is earned is known as the previous year.
In layman language the current financial year is known as the previous year. The financial year starts from 1st April and end on 31st March of the next year.
For Instance, for the salary income earned from 1 April 2017 - 31st March 2018 .The previous year would be 2017-18.
All the assessee’s are required to follow the financial year( April 1 to March 31) as previous year for all types of incomes. Incase, of a newly set-up business/profession or first job then your first previous year will be less than 12 months. Though from subsequent years your previous year will always be your financial year.
Remember your previous year can never exceed 12 months.
What is the difference between Financial Year and Assessment Year?
Financial Year is the actual year starting with 1st of April and ending on 31st of March for which you’re filing your return and the Assessment Year will always be the “succeeding year”. For example, if you file return for F.Y. 2016-17, then the assessment year will be 2017-18.