What are Financial Year and Assessment Year? Difference Between Financial Year and Assessment Year
Definition of Financial Year/What is a Financial Year?The financial year may also be referred to as fiscal year or budget year. To put it simply, a financial year is one in which you earn income. On April 1st of every calendar year, the Financial Year (FY) begins. It ends on March 31st of the next calendar year. Sometimes the phrase "financial year" is abbreviated as "FY". Taxes must be measured and planned during the fiscal year, but they must be filed the following year or assessment year.
As an example - Earned income for the current fiscal year (FY) 2021-22 represents income earned between April 1, 2021, and March 31, 2022.
The income earned by you from April 1, 2021, to March 31, 2022, is referred to simply as the income earned during the Financial Year (FY) 2021-22.
Definition of Assessment Year/What is Assessment Year?
Assessment year is the tax year when the income tax department assesses and taxes your income. A year after a financial year is referred to as an Assessment Year. For example, if your financial year is 2021-22, the assessment year is 2022-23.
Under Indian law, both the financial and assessment years commence on 1st April and end on 31st March.
Assessment year is the tax year when the income tax department assesses and taxes your income. A year after a financial year is referred to as an Assessment Year. For example, if your financial year is 2021-22, the assessment year is 2022-23.Under Indian law, both the financial and assessment years commence on 1st April and end on 31st March.
Financial Year in India:
An Indian fiscal year begins on April 1 and ends on March 31. The assessment year 2021-22 will be the review year for Financial Year 2020-21. Under unusual circumstances, the financial year may change. Assessment and Financial Year in recent years in India:
An Indian fiscal year begins on April 1 and ends on March 31. The assessment year 2021-22 will be the review year for Financial Year 2020-21. Under unusual circumstances, the financial year may change. Assessment and Financial Year in recent years in India:
| Period | Financial Year | Assessment Year |
|---|---|---|
| 1 April 2018 to 31st March 2019 | 2018-19 | 2019-20 |
| 1 April 2019 to 31st March 2020 | 2019-20 | 2020-21 |
| 1 April 2020 to 31st March 2021 | 2020-21 | 2021-22 |
| 1 April 2021 to 31st March 2022 | 2021-22 | 2022-23 |
What's the Difference Between the Assessment Year (AY) and the Financial Year (FY):
The financial year of an individual is the year in which money is received for tax purposes. An assessment year occurs after the financial year when revenue for the previous year is assessed, taxes are collected, and ITRs are filed.
For example, the financial year that began on April 1, 2020, and ended on March 31, 2021, is called the Financial Year 2020-21. After the financial year ends, the assessment year begins, so AY 2021-22 will be the assessment year for FY 2020-21.
The financial year of an individual is the year in which money is received for tax purposes. An assessment year occurs after the financial year when revenue for the previous year is assessed, taxes are collected, and ITRs are filed.
For example, the financial year that began on April 1, 2020, and ended on March 31, 2021, is called the Financial Year 2020-21. After the financial year ends, the assessment year begins, so AY 2021-22 will be the assessment year for FY 2020-21.
What are the important differences between an AY and an FY?
Fiscal Year/ Financial Year (FY):
- This is a period during which income is earned.
- Salaried professionals and seniors earn their income during the financial year.
- For income earned in the fiscal year, taxation and evaluation takes place in the AY.
- Taxes cannot be levied on income earned prior to the start of the financial year because income has to be earned in the financial year first.
Assessment Year (AY):
- A financial year is followed by the assessment year as that is when tax returns must be filed.
- As far as the income earned during the financial year is concerned, AY is the time when that income is evaluated.
- The Forms of the Income Tax Return are specialized forms for assessing and taxing annual income..
- Individuals will be taxed on their earnings in the AY after they have earned money.
Why is there an Assessment Year on the ITR form?
Because taxable income is generally calculated in the year following the financial year, an assessment year is included in income tax forms. Income can only be taxed after it is paid.
There is always the possibility of adverse circumstances occurring throughout the year, whether at the beginning, the middle, or the end. Consequently, when filing income tax returns, the Assessment year must be selected.
Because taxable income is generally calculated in the year following the financial year, an assessment year is included in income tax forms. Income can only be taxed after it is paid.There is always the possibility of adverse circumstances occurring throughout the year, whether at the beginning, the middle, or the end. Consequently, when filing income tax returns, the Assessment year must be selected.
Frequently Asked Questions About Financial Year and Assessment Year:
Questions 1. When is the deadline for filing income tax returns?
Usually, income tax returns are filed after the end of the financial year, in the Assessment Year.
Question 2. For the purpose of filing an income tax return, how do you calculate income and tax liability?
If you calculate how much money you earned for the entire fiscal year, then you can compute your taxes. You must file an income tax return when your income exceeds Rs 2.5 lakh.
Question 3. In what instances can I claim credit for advance tax and TDS?
In your annual report, you will be able to claim advance tax, TDS, and TCS charged during the financial year.
Question 4. When filing an ITR, what is the assessment year?
Income cannot be taxed until it is paid. At any point in the year, whether at the start, in the middle, or at the end, uncertain circumstances can crop up. So, when filing your income tax return, you now need to select the assessment year. In Assessment Year 2021-22, taxes will be payable on income from April 1, 2020, to March 31, 2021 (current Financial Year 2020-21).
Questions 1. When is the deadline for filing income tax returns?
Usually, income tax returns are filed after the end of the financial year, in the Assessment Year.
Question 2. For the purpose of filing an income tax return, how do you calculate income and tax liability?
If you calculate how much money you earned for the entire fiscal year, then you can compute your taxes. You must file an income tax return when your income exceeds Rs 2.5 lakh.
Question 3. In what instances can I claim credit for advance tax and TDS?
In your annual report, you will be able to claim advance tax, TDS, and TCS charged during the financial year.
Question 4. When filing an ITR, what is the assessment year?
Income cannot be taxed until it is paid. At any point in the year, whether at the start, in the middle, or at the end, uncertain circumstances can crop up. So, when filing your income tax return, you now need to select the assessment year. In Assessment Year 2021-22, taxes will be payable on income from April 1, 2020, to March 31, 2021 (current Financial Year 2020-21).
Financial Year Assessment Year April 1st March 31st FY AY ITR form TDS TCS Tax
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