What is Assessment Year(AY) & Financial Year(FY)| Difference Between AY & FY


(Last Updated On: August 28, 2019)

When it comes to income tax people are often heard talking about income tax return filing, income tax notices, the refund status, deductions, tax benefits and much more. But one of the basic and most important terms in all income tax communications are Financial Year and Assessment Year. No communication or reference could be correctly made in Indian direct taxes if the assessment year or the financial year to which it pertains, has been referred wrongly.

Financial Year and Assessment Year have been ages old terms in Income Tax. Still, at the time of 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 the problem while e filing income tax returns. To help filing the income tax return in a smooth & hassle-free manner, we bring this blog to solve all your queries related to the assessment year and financial year.
In this blogpost we will explain you the meaning of financial year, assement year and previous year in India, in detail


What does Financial Year mean?

The financial year is the year in which you have earned the income. It starts from 1st April & ends on 31st March of the next year. The term “Financial Year” is also commonly referred to as FY.

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,

  • The income you earned from 1st April 2018 to 31st March 2019 is the income earned in the current Financial Year (FY) 2018-19. Also,
  • Any income earned by you for the period starting from 1st April 2017 to 31st March 2018 can be simply stated as income earned in Financial Year (FY) 2017-18.

What does Assessment Year mean?

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. For e.g.

  • Income earned in the current Financial Year 2018-19 (i.e. from 1st April 2018 to 31st March 2019) will become taxable in Assessment Year 2019-20 (i.e. from 1st April 2019 to 31st March 2020).
  • Income earned in Financial Year 2017-18 (i.e. from 1st April 2017 to 31st March 2018) will become taxable in Assessment Year 2018-19 (i.e. from 1st April 2018 to 31st March 2019).

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


What does Previous Year mean?

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


Common FAQs on Assessment Year(AY) & Financial Year(FY)


What is Assessment Year and Financial Year?

As described above, income earned in a financial year becomes taxable in the assessment year. E.g.

  • Income earned in FY 2017-18 will be taxed in AY 2018-19. And,
  • Income earned in the current Financial Year (FY) 2018-19 will be taxed in Assessment Year (AY) 2019-20.

What is the full form of AY?

In general most of the taxpayers use the term AY instead of the full form that is Assessment Year.


What is the full form of FY?

In general most of the taxpayers use the term FY instead of the full form that is Financial Year.


What is the current financial year?

At present, the current financial year is FY 2018-19 (starting from 1st April 2018 and ending on 31st March 2019).


What is the accounting year?

Accounting year or previous year are the terms used interchangeably. It is also known as the financial year.


How to check the assessment year 2018-19 & 2019-20 last date?

The last date of Assessment Year 2018-19 is 31st March 2019 and of Assessment Year 2019-20 is 31st March 2020.


What is assessment year?

As we have described above, Assessment Year (AY) is that year in which income earned by you in Financial Year (FY) is taxed. Thus in simple terms we can say it’s the year in which you file the income tax return for the income earned in the financial year by you.

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, the correct total income for FY 2017-18 can only be known after 31st March 2018.

Hence, taxing of income earned in FY 2018-19 is possible only on 1st April 2019 & this period of 1st April 2019 becomes AY for FY 2018-19.

Similarly, for FY 2019-20 the tax-ability will arise in AY 2020-21.


What is the relevant assessment year for the financial year 2017-18?

For Financial Year (FY)  2017-18, the Assessment Year (AY) 2018-19 will be applicable.


What is the relevant assessment year for the financial year 2018-19?

For Financial Year (FY) 2018-19, the Assessment Year (AY) 2019-20 will be applicable.


Is financial year and previous year same?

Yes, for the purpose of ITR filing, financial year and previous year mean the same. For eg, the Financial Year 2017-18 also means Previous Year 2017-18.


Financial Year ends in which month every year in India?

In the case, of FY 2017-18, it is 31st March 2018. For FY 2018-19, the last month will be 31st March 2019. That means in India Financial Year ends on every 31st March every year and the new financial year starts from the 1st April.


What is the duration of Financial Year 2017?

Financial Year 2017 or FY 2017-18 started from the 1st April 2017 & ended on 31st March 2018. The assessment year 2018 or AY 2018-19  shall be relevant to the taxpayers earning income in this financial year.


What is the duration of Financial Year 2018?

Financial Year 2018 or FY 2018-19 started from the 1st April 2018 and will end on 31st March 2018. The assessment year 2019 or AY 2019-20 shall be relevant to the taxpayers earning income in this financial year.


Financial Year and Assessment Year in Different languages

What does Assessment Year and Financial Year mean in Hindi?

The Assessment Year is called निर्धारण वर्ष (nirdhaaran varsh)

And the Financial Year is called वित्तीय वर्ष (vitteey varsh)


What does Assessment Year and Financial Year mean in Telugu?

The Assessment Year is called అసెస్మెంట్ ఇయర్ (Asesmeṇṭ iyar)

And the Financial Year is called ఆర్థిక సంవత్సరం (Ārthika sanvatsaraṁ)


What is the menaing of Assessment Year and Financial Year in Bangla?

The Assessment Year is called মূল্যায়ন বছর (Mūlyāẏana bachara)

And the Financial Year is called আর্থিক বছর (Ārthika bachara)


What does Assessment Year and Financial Year mean in Punjabi?

The Assessment Year is called ਮੁਲਾਂਕਣ ਸਾਲ (Mulāṅkaṇa sāla)

And the Financial Year is called ਵਿੱਤੀ ਸਾਲ (Vitī sāla)


What does Assessment Year and Financial Year mean in Gujarati?

The Assessment Year is called આકારણી વર્ષ (Ākāraṇī varṣa)

And the Financial Year is called નાણાકીય વર્ષ (Nāṇākīya varṣa)


What is the meaning of Assessment Year and Financial Year in Kannada?

The Assessment Year is called ಮೌಲ್ಯಮಾಪನ ವರ್ಷ (Maulyamāpana varṣa)

And the Financial Year is called  ಹಣಕಾಸು ವರ್ಷ (Haṇakāsu varṣa)


What is the meaning of Assessment Year and Financial Year in Malayalam?

The Assessment Year is called വിലയിരുത്തൽ വർഷം (vilayiruttal varṣaṁ)

And the Financial Year is called  സാമ്പത്തിക വർഷം (sāmpattika varṣaṁ)


What does Assessment Year and Financial Year mean in Marathi?

The Assessment Year is called मूल्यांकन वर्ष (Mūlyāṅkana varṣa)

And the Financial Year is called  आर्थिक वर्ष (Ārthika varṣa)


What is the meaning of Assessment Year and Financial Year in Tamil?

The Assessment Year is called மதிப்பீட்டு ஆண்டு (Matippīṭṭu āṇṭu)

And the Financial Year is called  நிதி ஆண்டு (Niti āṇṭu)


What is the meaning of Assessment Year and Financial Year in Sindhi?

The Assessment Year is called تشخيص وارو سال

And the Financial Year is called  مالي سال


What is the meaning of Assessment Year and Financial Year in Urdu?

The Assessment Year is called تشخیص کا سال

And the Financial Year is called  مالی سال


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 🙂


 

Difference between Financial Year(FY) & Assessment Year(AY)

 

Read More: What Is Income As Per Income Tax Act?

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.