Before filing your income tax return, you should make sure that you choose the right Financial Year (FY) and Assessment Year (AY) to calculate your income tax liability. Using the wrong FY or AY might lead to making mistakes when you file your income tax returns. To avoid this confusion, here’s a fast and easy guide that’ll break down the differences between assessment and financial year.
What exactly is a Financial Year?
An FY or Financial Year can be defined as the time from 1 April to 31 March every calendar year — the accounting year when you generate an income.
What exactly is an Assessment Year?
An AY or assessment year is the accounting year that follows the financial year or FY. This is the period when the money produced throughout the financial year is evaluated and taxed. Both Assessment Year and Financial Year begin on April 1 and finish on March 31 of a calendar year. For example, the Assessment Year for Financial Year 2021-22 is AY 2022-23.
Recent Assessment Years and Financial Years
|Calendar Year||Assessment Year (AY)||Financial Year (FY)|
|1st April 2022 – 31st March 2023||2023-24||2022-23|
|1st April 2021 – 31st March 2022||2022-23||2021-22|
|1st April 2020 – 31st March 2021||2021-22||2020-21|
|1st April 2019 – 31st March 2020||2020-21||2019-20|
|1st April 2018 – 31st March 2019||2019-20||2018-19|
|1st April 2017 – 31st March 2018||2018-19||2017-18|
|1st April 2016 – 31st March 2017||2017-18||2016-17|
Assessment Year vs. Financial Year
The financial year can be described as the time period in which revenue is earned. The assessment year can be described as the accounting year that follows the fiscal year and is when tax returns are due.
Both Financial Year and Assessment Year sends on March 31st and start on April 1st. The Financial Year is thus the accounting year in which companies, salaried professionals, self-employed individuals and elderly citizens earn their income, whereas the next accounting year, the Assessment Year, is the period when the previously obtained revenue is appraised for taxation.
Why Assessment Year is used on Income Tax Return Forms?
Since earnings for a certain fiscal year is examined and charged for tax in an assessment year, tax return documents include the assessment year. Because income cannot be evaluated for taxation before it is received in a fiscal year, it is charged for tax in the following accounting year.
Circumstances such as job termination, job shift, new investments, and so on may arise at the end or middle of the financial year. Furthermore, the amount of revenue earned in a financial year cannot be calculated accurately until the year is through. As a consequence, the tax review may only commence once the financial year has come to a conclusion. So, while filing their income tax returns, individuals must mention the Assessment Year.
Things to keep in mind while completing your Income Tax Returns in Assessment Year
- Return filing is not a difficult task if you have all the necessary documents handy. If all essential documentation, including capital gains tax reports, Form 16A, and Form 26S, are in order, tax returns for a certain Assessment Year are much more than likely to be filed in a timely way. There are no difficulties in the transmission of tax returns that are expected to occur.
- E-filing tax returns during an Assessment Year is a very popular method since it can be completed at any time of day or night. With this, you will be able to manage your affairs at your convenience and will not have to squeeze them into your busy schedule.
- When submitting tax returns throughout the fiscal year, it is a smart option for every person to utilize online tax return calculators. These tax return calculators are free to utilize and provide precise numbers of the deductions in tax that people can claim for income generated in a certain fiscal year. Online Tax return calculators are generally updated regularly and may be used effectively on both mobile devices and computers.
Filing your income tax returns should be something you approach with confidence, not dread. Take a few minutes to make sure you’re using the right financial/assessment year and you’ll be off to a flying start.
Hopefully, this quick guide has given you a better understanding of the two main accounting years: financial year and assessment year. The most important takeaway here should be that both FY and AY carry important definitions and information, but they’re not interchangeable (as many people assume). Make sure that you stay clear of mixing it up when filing your taxes in the future!
Any person whose income is above the minimum taxable limit (2,50,000 INR), whether a Non-Resident Indian or not, is required to submit an annual income tax return to the Indian Government. Please keep in mind that money generated or collected in India for a Non-Resident Indian is taxed in India.
A taxpayer must file their income tax returns in an assessment year, which is the accounting year after the financial year’s end.
If a taxpayer fails to file his or her income tax return by the deadline, a fine of up to 5,000 INR must be paid. Nonetheless, the fine amount for individuals with an income less than 5,00,000 INR is 1,000 INR.