The assessment year is the year following the income year in which the income is evaluated. This is the time in which the income earned during fy is assessed and taxed.
Financial year is the year or the time period within which income is earned.
Income year and assessment year. The income year is the time between 1 april and 31 march in which you earn an income. The assessment year is the year that follows the financial year and it is the period in which tax returns are filed. What is assessment year.
Therefore basically the assessment year is considered to be a 12 months period starting from april 1 during which an assessee is required to file the return of income itr for the previous year and the ito has to initiate assessment proceedings for such returned income and tax thereon. Assessment year is the immediately succeeding year of the financial year. The year in which income is earned is known as previous year py and the next year in which income is assessed is known as assessment year ay.
The assessment year ay is the year that comes after the fy. Income earned in a year is assessed in the next year. Determination of income year has the following importance.
Year of assessment ya refers to the year in which income tax is calculated and charged. For ya 2020 the assessment is for income earned from 1 jan 2019 to 31 dec 2019. Financial year is the year for which an assessee s income for the previous year is assessed under the it act for taxation.
Both fy and ay start on 1 april and end on 31 march. From the tax perspective financial year is the year in which a person earns an income. The assessment is for the income earned in the preceding year starting on 1 jan and ending on 31 dec.
Assessment year is the following year in which this income is assessed and taxed. It is mandatory for all assessee to follow financial year from 1st april to 31st march as previous year for income tax purpose. You will understand the difference clearly through the following example.
Assessment year is the year followed by the financial year in which the evaluation of the previous year s income is done tax is paid on the same and itr is filed. A financial year fy is the period between 1 april and 31 march the year in which you earn an income. Both fy and ay end on the 31 st of march and begin on the 1 st of april.