What Is Previous Year In Income Tax?

While researching different sections of the Indian Income Tax Act, you might have come across the words such as ‘in the previous financial year’. Understanding this phrase is essential to knowing the rules and regulations of Indian income tax laws and adhering to them while filing returns. 

Hence, if you wish to gain a clear insight into what is previous year in income tax, keep reading the following sections.  

What is Previous Year in Income Tax?

As per India’s income tax laws, the income which taxpayers earn in the current year will be taxable in the next financial year. Thus, the previous year in income tax is the current financial year. This period starts on 1^st April and ends on 31^st March next year.  

For example, your earnings between 1^st April 2024 and 31^st March 2025 will come under the financial or previous year 2024-25. It will be assessed for taxation in the next year, i.e. assessment year 2025-26.  

New Income Tax bill, 2025, proposed the concept of ‘Tax Year’, the tax year means the period of twelve months of the financial year commencing on 1st April. This is seen to replace the concept of Financial Year and Assessment Year reducing confusion.

Previous Year in Income Tax Section

All rules pertaining to previous year in income tax come under Section 3. Under this, there are several provisions which taxpayers must keep in mind while determining their previous year.

For instance, in case of new businesses, their previous years will range from the day their source of income came into existence until 31^st March of that year. From the next financial year, the normal 12-month period ranging from 1^st April to 31^st March will be applicable.  

How to Look at Previous Year Data Income Tax in India?

While filing returns during a given assessment year, you need to analyse transactions which you made in the previous financial year. Under such circumstances, you need to include all your financial dealings made between last year’s 1^st April to the present year’s 31^st March. 

Here is an example of previous year in Income Tax which gives you better explanation. If you are filing IT returns for the assessment year 2025-26, you need to record all the transactions  from 1^st of April to 31^st of March in your ITR which is known as the Previous year.

Previous Year Income Tax Return Download

To download returns filed in previous financial years, follow these steps: 

Step 1 – Visit the Income Tax Department's official website and log in with your credentials. 
Step 2 – Under 'e-file' tab, click on ‘Income Tax Returns’. 
Step 3 – Tap on ‘View Filed Returns’. The platform will display all your previously filed returns as well as their processing status.  
Step 4 – Select your assessment year and click ‘Download Form’. 

Difference Between Assessment Year and Previous Year in Income Tax

Even though assessment year and previous year might sound the same, there is a fine line of difference which is significant to understand. Find out the differences between the assessment year and previous year in income tax in the table below:

Exception of Previous Year in Income Tax

The income of an assesse for a previous year is taxed in the assessment year. However in few cases this rule does not apply and the income is taxed in the previous year itself. Below are the cases in which income of previous year is taxed in previous year itself.

1. Income by People Who Are Leaving India Permanently or for a Long Time
   According to Section 174, probable income till the individual’s approximate departure date is taxable in the previous year. This rule was introduced as it is difficult to recover tax from a person who is leaving India permanently or for a long time period.    
2. Income by a Non-resident from a Shipping Business in India
   Section 172 states that income of non-residents having a shipping business in India is taxable in the previous year. The individual must own or charter the ships and they must carry mail/goods/passengers/cargo to Indian ports. 
   The reason behind this rule is that the individual may not have an agent in India and it will be difficult to recover tax in case he/she leaves India.   
3. Income From a Discontinued Business
   According to Section 176, income from a business which has shut down in the previous year needs to be taxed in the previous year itself. However, the implementation of this rule is completely dependent on the Assessment Officer. 
4. Income by People Who Are Likely to Transfer Property in Order to Avoid Tax
   If any person is about to, sell or transfer property in order to avoid tax, in such cases tax will be charged from the beginning of the previous year to till the date in which assessing officer commences proceedings under this section.
5. Association of persons or body of individuals or artificial juridical person formed for a particular event or purpose If an AOP/BOI/etc is formed or established for a particular event or purpose that particular event is about to end in the same year, in such cases tax will be charged for the income from starting of that particular event to till that particular event dissolves or ends.

Now that you have a detailed and clear idea of previous year in income tax, it will be helpful for you to file accurate returns. Moreover, you must keep an eye out for the due date for filing taxes. This will help avoid any last-minute rushes along with the fines that come with late filing.