What is known as a Financial Year?
For the purpose of income tax, the financial year represents the particular year in which the income is earned. The financial year, called FY in short, starts on 1st April and ends on 31st March of the following year. The income that you earn during these dates is subject to tax.
For instance, the income that you earned from 1st April 2021 to 31st March 2022 would be called the income for the FY 2021-22. You would have to file a return on this income in 2022 within the return filing due date.
What is known as an Assessment Year?
In simple terms, Assessment Year, or AY, in short, is the specific year that comes after the end of the financial year in which the Income Tax is assessed. The Assessment Year also starts on 1st April and ends on 31st March. This is the particular year in which the total income that you earned in a financial year is taxed.
The assessment year is always used in relation to the previous financial year.
For instance, if the year from 1st April 2021 to 31st March 2022 is the financial year, the assessment year for this financial year would be from 1st April 2022 to 31st March 2023. In other words, if the financial year is 2021-22, the assessment year would be 2022-23.
Assessment and Financial Year list for recent years:
Here’s a table showing the assessment year (AY) and financial year (FY) for recent years –
Financial year | Assessment year |
|---|---|
1st April 2018 to 31st March 2019 – FY 2018-19 | 1st April 2019 to 31st March 2020 – AY 2019-20 |
1st April 2019 to 31st March 2020 – FY 2019-20 | 1st April 2020 to 31st March 2021 – AY 2020-21 |
1st April 2020 to 31st March 2021 – FY 2020-21 | 1st April 2021 to 31st March 2022 – AY 2021-22 |
1st April 2021 to 31st March 2022 – FY 2021-22 | 1st April 2022 to 31st March 2023 – AY 2022-23 |
1st April 2022 to 31st March 2023 – FY 2022-23 | 1st April 2023 t0 31st March 2024 – AY 2023-24 |
What is the integral difference between FY and AY?
The definition of the assessment and financial years clearly highlight their differences too. Here’s a quick table to check out the primary differences between FY and AY –
Assessment year | Financial year |
|---|---|
The year in which the earned income is taxed | The year in which the income is earned |
Always follows the financial year | Always precedes the assessment year |
Only self-assessment tax is payable in the assessment year | Advance tax can be paid in the financial year |
No tax planning can be done for the income earned in the financial year | Tax planning can be done during the financial year to reduce the taxable income which would be assessed in the assessment year |
Importance of Assessment Year (AY) on the ITR Form:
The income tax return has mentioned the assessment year because it calculates the tax earned in the financial year. Since the tax is assessed and paid in the assessment year, the AY is mentioned for reference purposes.
What are the Assessment years and Financial Years called in India in Hindi?
In Hindi, the financial year is called the Vittiya Varsh, while the assessment year is called the Nirdharan Varsh.
Frequently Asked Questions
1. If I make a tax-saving investment on 1st April 2023, would I be able to claim a deduction in my tax liability for the financial year 2022-23?
Since you are making the investment after the financial year ends on 31st March 2023, you would not be able to claim a deduction in the tax liability for FY2022-23. However, this deduction would be allowed in the next financial year, i.e., FY 2023-24, since you made it at the beginning of the next year.
2. What is the difference between the fiscal year and the financial year?
The term ‘fiscal year is used in other countries and represents a calendar year starting from 1st January and ending on 31st December. This represents the financial year for taxation purposes in such countries.
However, in India, the fiscal and financial years start on 1st April and end on 31st March.
3. What is the last date for filing the ITR?
The last date for filing the ITR is, usually, 31st July. However, the income tax department might allow extensions to taxpayers in different financial years.
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