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AY and FY

Often we get confused between Assessment Year (AY) and Financial Year (FY). This article helps you in understanding the difference between the two terms.

FINANCIAL YEAR

Financial year is the year in which an assessee earns income. Financial year starts from April 1st and ends on March 31st of the following year.

ASSESSMENT YEAR

Assessment year is the year in which the income earned during a financial year is ASSESSED to tax and INCOME TAX RETURN IS FILED. Assessment year is the year FOLLOWING a financial year . Assessment year starts from April 1st and ends on March 31st.

Examples:

 PeriodFinancial Year (FY)  Assessment Year (AY)
 01.04.2021 to 31.03.2022 2021-22 2022-23
 01.04.2022 to 31.03.2023 2022-23 2023-24
 01.04.2023 to 31.03.2024 2023-24               2024-25

Income tax department uses Assessment year (AY) in their communications because the computation and assessment of income is done during the assessment year.

POINTS TO BE NOTED: 

  • AY 2020-21 is read as FY 2019-20.
  • Financial year precedes an Assessment year.
  • Assessment Year succeeds a Financial year.

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