Assessment Year and Financial Year | Difference Between AY & FY


When it comes to income tax efiling many taxpayers face confusion in Assessment Year and Financial Year. They tend to presume both as the same thing & this leads to problem while e filing incometax returns. To help filing income tax return in a smooth & hassle-free manner, we bring this blog to solve all your queries related to assessment year and financial year.

 

Financial Year

Financial year is the year in which you have earned the income (starting from 1st April & ending on 31st March). The term “Financial Year” is also commonly referred as FY. Any income earned by you for period starting from 1st April, 2017 to 31st March, 2018 can be simply stated as  income earned in FY 2017-18.

 

Assessment Year

Assessment year means the year (from 1st April to 31st March) in which income earned by you in a particular financial year is taxed. For e.g. income earned in Financial Year 2017-18 (i.e. 1st April, 2017 to 31st March, 2018) will become taxable in Assessment Year 2018-19 (i.e. 1st April, 2018 to 31st March, 2019).

In simple words, Assessment Year is always the year next to the Financial Year.

 

Previous Year

For the purpose of income tax or IT return, terms financial year and previous year are used interchangeably. So, FY 2017-18 can also be said PY 2017-18 & the income of such year will become taxable in AY 2018-19.

 

Some examples of Assessment Year and Financial Year or Previous Year

Period

Financial Year

Previous Year

Assessment Year

1 April, 2015 to 31st March, 2016

2015-16

2015-16

2016-17

1 April, 2016 to 31st March, 2017

2016-17

2016-17

2017-18

1 April, 2017 to 31st March, 2018

2017-18

2017-18

2018-19

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

 

The concept of assessment year and financial year is simple to understand provided one has proper guidance. To make it more clear, we bring some common FAQs related to assessment year and financial year.

 

Common FAQs

  • What is AY & FY ?

As described above, income earned in a financial year becomes taxable in assessment year. E.g. income earned in FY 2017-18 will be taxed in AY 2018-19.

  • What is present financial year ?

At present the financial year is FY 2018-19 (1st April, 2018 to 31st March, 2019).

  • What is the importance of assessment year ?
As we told above, AY is that year in which income earned by you in FY is taxed.
Let us consider an example, to calculate correct tax liability it is important to know accurate total income. Now, for ITR filing till 31st July, 2018 (extended till 31st Aug, 2018) the income tax department consider total income earned by you from 1st April, 2017 to 31st March, 2018. Therefore, correct total income for FY 2017-18 can only be known after 31st March, 2018.
Hence, taxing of income earned in FY 2017-18 is possible only on 1st April, 2019 & this period of 1st April, 2019 becomes AY for FY 2017-18.
Similarly, for FY 2018-19 the tax-ability will arise in AY 2019-20.
  • What is the assessment year for financial year 2017-18 ?

For FY 2017-18, the AY will be 2018-19.

  • Is financial year and previous year same ?

Yes, for the purpose of ITR filing, financial year and previous year mean the same.

  • What month is the end of the financial year in India ?

In case of FY 2017-18, it is 31st March, 2018. For FY 2018-19, the last month will be 31st March, 2019.

  • When did FY17 start ?

FY17 or FY 2017-18 started from 1st April, 2017 & ended on 31st March, 2018.

 

We hope, after going-through the FAQs and blog, all your queries related to assessment year and financial year are solved. Still, if you need any help, you can get in touch with our eCAs.

Now calculate your tax liability/ refund using our free income tax calculator. And also real time income tax refund status from the income tax department for free.

Happy Filing 🙂

 

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