Assessment Year

What is an Assessment Year (AY) and Financial Year (FY)

In many tax systems, including that of India, an Assessment Year (AY) and a Financial Year (FY) are significant concepts.

• Financial Year (FY): This denotes the twelve-month duration utilized for accounting aims to compute annual financial statements and tax obligations. In India, the financial year commences on April 1st and concludes on March 31st of the subsequent year. For instance, FY 2022-2023 kicks off on April 1, 2022, and concludes on March 31, 2023.
• Assessment Year (AY): The assessment year represents the immediate succeeding year following the financial year. It's the period when the income garnered in the previous financial year undergoes assessment and taxation. For instance, for the financial year 2022-2023, the assessment year would be 2023-2024. This is when taxpayers submit their income tax returns for the earnings accrued in the preceding financial year.

Comprehending the disparity between the financial year and assessment year holds paramount importance for both individuals and businesses, aiding in effective tax planning and ensuring compliance with regulatory requirements.

Current Assessment Year

Given my last update in January 2022, real-time data isn't available. However, assuming the ongoing financial year as FY 2023-2024 (April 1, 2023, to March 31, 2024), the corresponding assessment year would be AY 2024-2025. During AY 2024-2025, taxpayers would file their income tax returns for the earnings accrued in FY 2023-2024. It's imperative to consult updated sources for confirmation of the current assessment year, as it could differ based on the prevailing calendar year and tax regulations in your locality.

Difference Between AY and FY

The core disparity between Assessment Year (AY) and Financial Year (FY) lies in their unique objectives and temporal spans:

• Financial Year (FY): This marks the timeframe designated for financial accounting and tax computations, encapsulating the twelve-month span within which income is generated and expenditures are accrued. In countries like India, the financial year conventionally spans from April 1st to March 31st of the subsequent year.
• Assessment Year (AY): This represents the year directly succeeding the financial year. It's the timeframe wherein the income earned in the preceding financial year undergoes assessment for taxation. Taxpayers file their income tax returns for a particular financial year during the corresponding assessment year. For instance, income earned in FY 2022-2023 is evaluated for taxation in AY 2023-2024.

Essentially, the financial year is the period during which income is earned, whereas the assessment year is when that income undergoes evaluation and taxation.

An assessment year refers to the period in which an individual's income is assessed for the purpose of calculating income tax payable to the government. The assessment year follows the financial year , which starts from April 1st and ends on March 31st of the following year.

For example, the financial year 2020-21 starts on April 1st, 2020, and ends on March 31st, 2021. The assessment year for this financial year would be 2021-22, during which individuals would file their income tax returns for the income earned during the financial year 2020-21.

During the assessment year, individuals should compile all the required documentation and calculate their total taxable income, deductions , and tax liability. They should file their income tax returns before the deadline to avoid penalties and interest on outstanding taxes.

The assessment year also allows taxpayers to rectify any errors or discrepancies in their income tax returns. The government may also initiate tax assessments during this period to verify the accuracy of the tax returns filed by taxpayers.