Assessment Year

What is an Assessment Year in Income Tax?

The Assessment Year (AY) is the period during which the income earned in the previous Financial Year (FY) is assessed and taxed by the government. While the income is earned during the FY, tax filings and assessments occur in the AY. Both the FY and AY start on 1 April and end on 31 March of the following year. For example, if the FY is 2023-24, the AY would be 2024-25, which means the income earned from April 2023 to March 2024 will be assessed and taxed in the period from April 2024 to March 2025.

What is a Financial Year?

A Financial Year (FY) is a 12-month period used by businesses and governments for accounting and tax purposes. In India, the FY starts on 1 April of one year and ends on 31 March of the following year. This is the period during which individuals, businesses, and organizations earn income, maintain financial records, and plan their budgets.

Assessment Year (AY) and Financial Year (FY) for Recent Years 

Difference Between Assessment Year (AY) and Financial Year (FY)

1. Financial Year (FY) in Income Tax:

   • A 12-month period used for accounting and financial reporting purposes.

   • In India, it runs from April 1st to March 31st of the current year.

   • Used for tracking income, expenses, and financial performance.

2. Assessment Year (AY) in Income Tax:

   • A 12-month period used by the tax authorities to assess an individual or entity's income tax liability.

   • Starts on April 1st and ends on March 31st of the following year.

   • The AY is one year after the FY in which the income was earned. For example, the AY for the financial year 2024-25 would be 2025-26.

How to File Taxes for Assessment Year in Income Tax?

To file taxes for an Assessment Year (AY) in India, follow these steps:

1. Gather Necessary Documents:

   • Form 16: Provided by your employer, detailing salary, deductions, and taxes paid.

   • Form 26AS: Shows the tax credited to your account, including TDS (Tax Deducted at Source).

   • Bank Statements: To account for interest income and other financial activities.

   • Investment Proofs: Documents for deductions like ELSS, PPF, insurance premiums, home loan interest, etc.

   • Capital Gains Information: If applicable, for investments like mutual funds or stocks.

2. Choose the Appropriate Income Tax Return (ITR) Form:

   Based on your income sources, you need to choose the correct ITR form:

   • ITR-1: For salaried individuals with income up to ₹50 lakh.

   • ITR-2: For individuals with income from capital gains or foreign assets.

   • ITR-3: For professionals or business income.

   • ITR-4: For individuals under the presumptive taxation scheme.

   

3. Visit the Income Tax e-Filing Portal:

   • Go to Income Tax e-Filing website https://www.incometax.gov.in

   • Register if you are a first-time filer, or log in with your credentials (PAN card serves as your username).

4. Download or Use the Online Utility:

   • You can either download the appropriate ITR form in Excel/Java utility format or use the online filing system available on the portal for most forms (like ITR-1 and ITR-4).

5. Fill in Your Details:

   • Personal Information: PAN, address, contact info, etc.

   • Income Details: Enter income from all sources (salary, business, capital gains, other income).

   • Deductions: Provide details of deductions under sections like 80C, 80D, etc. (Investments, insurance, medical expenses, etc.).

   • TDS/TCS and Tax Payments: Input TDS details (from Form 16/26AS) and advance tax or self-assessment tax, if paid.

6. Verify Your Tax Calculation:

   • The system will automatically compute your tax liability based on the data entered. Check that the correct tax amount is calculated, taking into account any tax credits or refunds.

7. Submit the Return:

   • Once you verify all details, submit the ITR form electronically.

   • Acknowledgement (ITR-V): If you are not using a digital signature, you will get an ITR-V form. You can either:

     • E-Verify your return using Aadhaar OTP, net banking, or EVC (Electronic Verification Code).

     • Or, send a signed copy of the ITR-V to the Centralized Processing Centre (CPC) in Bengaluru via post.

8. Check Refund Status (if applicable):

   • If you are eligible for a refund, you can track its status through the e-filing portal or via Form 26AS.

9. Respond to Notices (if any):

   • After submitting, if there are any discrepancies or additional information required, you might receive a notice from the Income Tax Department. Respond promptly to resolve the issue.

   Filing Deadline:

   Ensure that you file your returns by 31 July of the Assessment Year to avoid penalties.

Financial Year and Assessment Year in Hindi

• Financial Year (FY): वित्तीय वर्ष (Vittīya Varsh)

• Assessment Year (AY): आकलन वर्ष (Akalan Varsh)