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Many taxpayers confuse between the Financial Year (FY) and Assessment Year (AY). They often tend to treat them as the same, which leads to making mistakes when they file their income tax returns.
CBDT has issued a circular on 11th January 2022 extending the timelines for certain direct tax compliances for AY 2021-22.
1. ITR filing due date extension:
i) ITR filing for taxpayers covered under tax audit is extended to 15th March 2022
ii) ITR filing for transfer pricing cases is extended to 15th March 2022
2. Furnishing audit report:
i) Due date to furnish the audit report as per the Income Tax Act is extended to 15th February 2022
ii) Due date to furnish the audit report for transfer pricing cases is extended to 15th February 2022
A Financial Year (FY) is the period between 1 April and 31 March – the accounting year in which you earn an income.
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 2020-21, the assessment year is AY 2021-22.
|Period||Financial Year||Assessment Year|
|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|
|1 April 2017 to 31 March 2018||2017-18||2018-19|
|1 April 2016 to 31 March 2017||2016-17||2017-18|
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 2020 to 31 March 2021, then it is known as FY 2020-21. The assessment year for the money earned during this period would begin after the financial year ends – that is from 1 April 2021 to 31 March 2022. Hence, the assessment year would be AY 2022-22.
Since income for any particular financial year is evaluated and taxed in the assessment year, income tax return forms have 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.
The financial year (FY) in Hindi is called वित्तीय वर्ष and assessment year (AY) in Hindi is called निर्धारण वर्ष.
A taxpayer should file an income tax return in the assessment year (AY), which is the year following the closure of a financial year.
You should calculate your income for the full financial year and calculate the tax thereon. You need to file an income tax return when your income exceeds Rs 2.5 lakh.
You can pay the tax online before filing the income tax return.
At the time of filing the return, you can claim credit for advance tax, TDS and TCS paid during the financial year.