Financial Year
Assessment Year
The assessment year (AY) follows the financial year (FY) and is the period during which the income earned in the FY is evaluated and taxed. Both the FY and AY begin on April 1st and conclude on March 31st. For example, for the FY 2023-24, the corresponding assessment year is AY 2024-25
Typically, a company or entity will review accounts based on the financial year (FY), while the Income Tax Department will review based on the assessment year (AY).
Income for a specific financial year is assessed and taxed in the assessment year, which is why income tax return are assigned an assessment year (AY). Income earned in a financial year cannot be taxed until it is actually earned, which is why it is taxed in the following year.
Various situations such as job loss, job changes, new investments, and other factors can arise in the middle or end of the financial year. Additionally, the exact amount of income earned in a financial year cannot be determined until the end of that year. This is why the assessment process can only begin after the financial year has concluded. Therefore, taxpayers must indicate the appropriate assessment year when filing their income tax returns.
Differences between financial year and Assessment year:
Financial Year
A financial year starts from 1st April of a calendar year and ends on 31st March of the next calendar year
