Meaning of Financial Year and Assessment Year in ITR Acknowledgement

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  • Post last modified:September 3, 2020
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Financial Year is the year in which you earn an Income while Assessment Year is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it.

Every Assessee need to understand two commonly used terms while filling return i.e. Financial Year and Assessment Year. Many Assesses / Taxpayers get confused between these two terms. They tend to presume both terms as one and the same thing & this leads to several problems while filing income tax returns.

What does Financial Year mean?

For tax purposes, Financial year (FY) is the year in which you earn your income and also pay your taxes on this earned income. It starts from 1st April of calendar year & ends on 31st March of the next calendar year. The term “Financial Year” is also commonly referred to as F.Y.

For the purpose of Income tax financial year is sometimes called as Previous Year as it is the year preceding to the assessment year.

What does Assessment Year mean?

Assessment Year refers to the year in which the income of the taxpayer is assessed under the Income Tax Act. The assessment year (A.Y.) is the year that comes after the F.Y. Both Financial Year and Assessment Year start on 1st April and end on 31st March.

What is the difference between Financial Year and Assessment Year?

Financial Year is the year in which you earn an Income while Assessment Year is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it.

Financial year is also known as the Previous year. Assessment year is also known as the Tax year. A Financial year is followed by its Assessment year. Income tax return for any Financial year is filed in its Assessment year.

Note: This Post was last updated on September 3, 2020

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Sunita

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