Many People Remain Confuse Between Assessment year and Financial Year, both are related to each other but Many Taxpayers often treat both of them as same year, which is a mistake when file income tax return or while conducting scrutiny of Form 16/16a from the 26AS available on the government portal.
Financial Year
The financial year is the calendar year in which we received income from our Job or from our business. Financial year starts from the 1st April of each year and gets finish on march 31st of the next calendar year. In Short form we write “Financial year” as “FY”. The person who needs to pay tax is called as Assesses, an assesse must calculate a plan tax for the fiscal year, but assesse will file his/her income tax return next year or assessment year.
For Illustration
- Income received in the present financial year 2022-23 is the income received/ gained from 1st April2022 to 31st March 2023,
- Any Money earned by the assesses from 1st April 2022 to 31st March 2023, is simply referred to as income earned in financial year 2022-23
For purpose of income tax or income tax return, terms financial year and previous year are used interchangeably.
Assessment Year
The assessment year is the year during which we pay taxes on the money we received in financial year. In the relevant assessment year, we should file our income tax return within or before deadline. The year immediately after the financial year is known as the assessment year.
For Illustration
- Income received/gained in the current financial year 2022-23 will be taxable is assessment year 2023-24.
- In Assessment year 2023-24, Income which we have received in financial year 2022-23 will be taxable.
In Assessment year 2023-24, Income which we have received in financial year 2022-23 will be taxable.
For filing of Income tax return Individual required, Bank statement, salary slips, Investment Proofs and on other hand organization require different different reports like Tracking of cash flow, Evaluation of assets and liabilities, analyzing shareholder equity, Measuring profitability.
Explanation Through Example
|
Period |
Financial year |
Previous year |
Assessment Year |
|
1st April 2019 to 31st March 2020 |
2019 to 2020 |
2019 to 2020 |
2020 to 2021 |
|
1st April 2020 to 31st March 2021 |
2020 to 2021 |
2020 to 2021 |
2021 to 2022 |
|
1St April 2021 to 31st March 2022 |
2021 to 2022 |
2021 to 2022 |
2022 to 2023 |
|
Serial Number |
Financial Year |
Assessment Year |
|
1.) |
In financial year we Earned/ Received Income |
Assessment year follows the financial year. Assessment year is the year in which we pay tax and file our income tax return. |
|
2.) |
Financial year starts with 1st April and get end at 31st march. |
Just Like FY, AY also starts with 1st April and get end at 31st march. |
|
3.) |
In Hindi Financial year is popularly known as वित्तीय वर्ष |
In Hindi Assessment Year is Popularly known as निर्धारण वर्ष |
|
4.) |
Income cannot be taxed prior to its earned, it must always be earned with in the financial year. |
Once an assesse has earned money, it will be assessed for taxation purpose in the Assessment Year. |
|
5.) |
We can pay advance tax during financial year |
We have to pay self-assessment tax for the year. |
Final Conclusion: –
Key Difference Between FY and AY.
- Financial year is the year in which we earned Income.
- Assessment Year is the year which we calculate our tax and file return.
- For ITR Purpose we use Assessment Year in local wordings.
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