Financial year is the period between 1 April and 31 March in which you earn an income. Assessment year is the following year in which this income is assessed and taxed.
The financial year (FY) is the year in which you earn an income.
The assessment year (AY) is the year following the FY in which the income is evaluated.
AY comes after FY. Both AY and FY begin on the 1st of April and end on the 31st of March. Income is earned in FY and taxes on that income is paid in AY.
|Period||Financial Year||Assessment Year|
|1 April 2013 to 31 March 2014||2013-14||2014-15|
|1 April 2014 to 31 March 2015||2014-15||2015-16|
|1 April 2015 to 31 March 2016||2015-16||2016-17|
AY is the assessment year and FY is the financial year. 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 example, if your financial year is from 1 April 2015 to 31 March 2016, then it is known as FY2015-16. The assessment year for income earned during this period would begin after the financial year ends–that is on 1 April 2016 till 31 March 2017. Hence, the assessment year would be AY2016-17.
As mentioned above, assessment year is the year in which income is evaluated and taxed. This evaluation and taxation is done on income that is earned in the previous year, which is known as the financial year.
Every financial year and assessment year starts on the 1st of April and ends on the 31st of March.
Since income for any particular financial year is evaluated and taxed in the assessment year, income tax return forms have AY. Income is earned in a financial year but cannot be taxed before it is earned, hence it has to be evaluated and taxed after the financial year ends. Hence, taxpayers have to select AY while filing their income tax returns.
Financial year (FY) in Hindi is called वित्तीय वर्ष and assessment year (AY) in Hindi is called निर्धारण वर्ष.