Difference Between Assessment Year (AY) and Financial Year (FY)
Many taxpayers are confused between the Financial Year (FY) and the Assessment Year (AY). They often tend to treat them as the same, which leads to making mistakes when they file their income tax returns.
What is a Financial Year?
A Financial Year (FY) is the 12 month period between 1 April and 31 March – the accounting year in which you earn an income.
What is the Assessment Year?
The assessment year (AY) is the year that comes after the FY. This is the time in which the income earned during FY is assessed and taxed. Both FY and AY start on 1 April and end on 31 March. For instance, for FY 2023-24, the assessment year is AY 2024-25.
AY and FY for Recent Years
Period | Financial Year | Assessment Year |
1 April 2024 to 31 March 2025 | 2024-25 | 2025-26 |
1 April 2023 to 31 March 2024 | 2023-24 | 2024-25 |
1 April 2022 to 31 March 2023 | 2022-23 | 2023-24 |
1 April 2021 to 31 March 2022 | 2021-22 | 2022-23 |
1 April 2020 to 31 March 2021 | 2020-21 | 2021-22 |
1 April 2019 to 31 March 2020 | 2019-20 | 2020-21 |
1 April 2018 to 31 March 2019 | 2018-19 | 2019-20 |
What is the Difference Between AY and FY?
From an income tax perspective, FY is the year in which you earn an income. AY is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it.
For instance, if your financial year is from 1 April 2023 to 31 March 2024, then it is known as FY 2023-24. The assessment year for the money earned during this period would begin after the financial year ends – that is, from 1 April 2024 to 31 March 2025. Hence, the assessment year would be AY 2024-25.
Why Does an ITR Form have AY?
Since income for any particular financial year is evaluated and taxed in the assessment year, income tax return forms have an assessment year (AY). As the income earned in a financial year cannot be taxed before it is earned, so it is taxed in the following year.
Scenarios like loss of job, job change, new investments etc., can come up in the middle or end of the FY. Also, the income earned in a financial year cannot be exactly known before the end of the financial year. This is why the assessment can start only after the financial year ends. Hence, taxpayers have to select AY while filing their income tax returns.
What is the Financial Year and Assessment Year called in Hindi?
The financial year (FY) in Hindi is called वित्तीय वर्ष and assessment year (AY) in Hindi is called निर्धारण वर्ष.
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Frequently Asked Questions
Quick Summary
Taxpayers often confuse Financial Year (FY) and Assessment Year (AY). FY is the year you earn income, while AY is when the income is assessed and taxed. AY follows FY, both starting on April 1 and ending on March 31. Understanding this difference helps in filing tax returns accurately.
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