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Many taxpayers confuse between the Financial Year (AY) 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. Let’s understand the difference between the two and explore these concepts in detail.

  1. What is Financial Year?
  2. What is Assessment Year?
  3. AY and FY for recent years
  4. What is the difference between AY and FY?
  5. Why does an ITR form have AY?
  6. What is financial year and assessment year called in Hindi?

1. What is Financial Year?

A Financial Year (FY) is the period between 1 April and 31 March – the year in which you earn an income.

2. What is 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, FY 2019-20 and AY 2020-21 are one and the same.

Did-You-Know (4)  

3. AY and FY for recent years

Period Financial Year Assessment Year
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

4. 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 2019 to 31 March 2020, then it is known as FY 2019-20. The assessment year for the money earned during this period would begin after the financial year ends – that is from 1 April 2020 to 31 March 2021. Hence, the assessment year would be AY 2020-21.

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5. 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 AY. Income earned in a financial year cannot be taxed before it is earned. Scenarios like loss of job, job change, new investments etc. can come up in the middle or end of the FY. 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.

6. What is financial year and assessment year called in Hindi?

Financial year (FY) in Hindi is called वित्तीय वर्ष and assessment year (AY) in Hindi is called निर्धारण वर्ष.

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