Enter your Email Address here to receive GST updates from our experts. So the year in which you are doing the assessment and filing of your income for any financial year which has passed by or just ended is called Assessment Year. Starting from the process of selecting the year for filing Income-tax return to the payment of taxes to the government, taxpayers are required to select the Assessment Year. The need for assessment year (AY) in an Income Tax Return (ITR) arises because income for a specific financial year can be assessed and taxed earliest in the next year. ): As per the ITA, a Previous Year is the financial year immediately preceding the assessment year. Income tax returns are filed and taxes are paid in the assessment year after the financial year. The income earned during the previous year is assessed or taxed in the assessment year. Everything you ought to know about EPF Form 10C. Further, the rate of tax applicable will be the rate of assessment year. We all know that the Calendar Year commences on the 1st of January and ends on 31st of December every year. Knowing the difference between Assessment Year (AY) and Financial Year (FY) for a common taxpayer is quite baffling. Hindi Meaning of Financial Year and Assessment Year? Note: When Assessment Year is 2020-2021, the Financial Year is 2019-2020 which starts from 01/04/2019 and ends on 31/03/2020 Assessment year is the year following the financial year, and it is used for filing tax returns of a particular financial year. Previous Year (P.Y. Choose Assessment Year You are currently working on Tax Return of Assessment Year: 2020-2021. First, we’ll start with the easy one! Financial Year is therefore the year in which business people, salaried professionals and senior citizens earn their money while the following year which is AY is the time when the income that has been previously earned gets eva… The assessment year is the year that follows the financial year and it is the period in which tax returns are filed.Both FY and AY end on the 31st of March and begin on the 1st of April. 50,000 per month for financial year 2017-18. Thus the assessment year would be 2021-22. The taxpayer needs to file ITR not in the year in which he/she earns the income but after the end of that year i.e, in the assessment year. Hence, income is earned in Financial year (FY) and such income is taxed in Assessment year (AY). Assessment Year (AY) – Section 2(9) The financial year in which the income is subjected to tax by the Income Tax Authority is referred to as the assessment year. Hence the name – Assessment Year. The next year after the financial year when income is assessed for taxation is the assessment year. This necessarily doesn’t need to happen at the beginning of the year. Assessment year means the year (from 1st April to 31st March) in which income earned by the individual in a particular financial year is taxed. Definition of Assessment Year In accordance with the definition given in section 2 (9) of the Income-tax Act, 1961, the assessment year for an assessee is for a period of 12 months commencing from 1st April of every year. Incomes generated for the financial year 2013-2014 (i.e. Sometimes a fiscal year is also called a financial year, but fiscal year is the more common term in the United States. So the 2018 fiscal year would begin on October 1, 2017, and finish September 1, 2018. A Financial year starts from 1st April and ends at 31st March. [ 1961 c 15 § 84.04.040. For instance, for the Financial Year … For instance, if your financial year is 2020-21, the assessment year will be 2021-22. ITR for Salaried Individuals AY is a year immediately following the financial year. Financial Year (F.Y. Example 1: Financial year 2013-2014 starts from April 1st 2013 and ends on March 31st 2014. Probably, that’s why it’s called assessment year/ period. From the point of view of a company or any other entity, the terms - fiscal year, financial year, tax year and accounting year are one and the same because in all these terms: • the period consists of consecutive 12 months; The assessment of the income earned in FY 20-21 will be done in Assessment Year 2021-22. Consultation is free, your time is not. 1st April 2017 to 31st March 2018) will become taxable in the Assessment Year 2018-19 (i.e. For instance, the U.S. federal government starts its fiscal year on October 1, and ends its fiscal year on September 30. Mr. Albert is working in a software company and getting a salary of Rs. This should help one clear out all the misconceptions about the same. AY is the year in which returns are filed for the income earned in the previous financial year ended. Meaning of Assessment Year (AY) – Assessment Year means the period of 12 months commencing from 1st April every year. Hello friends . That means if you transact for goods/services anytime between April 1st, 2020 and March 31st, 2021, the applicable financial year for you will be 2020-21. FY is the year in which income is earned and the year in which income is taxed is known as Assessment Year. from 1.4.2013 to 31.3.2014) will be taxed based on these income tax rates in assessment year 2014-2015. As a person we earn income in one financial year and it gets taxed in the next financial year. The income of Mr. Albert is Rs. The items described under the definition of ‘income’ in this chapter are only inclusive in nature. 4 June, 2019 . 2020 and ending with 31 March 2021. Hindi meaning Financial year (FY) is वित्तीय वर्ष and Hindi meaning of assessment year (AY) is निर्धारण वर्ष. The Assessment Year is the year following the Financial year. Ltd. Copyright © 2020 Masters India IT Solutions Pvt. Financial year is a period of 12 months commencing on 1 April and ending on 31 March of the subsequent calendar year. The tax years in the UK you can claim are: 2016-17 2017-18 2018-19 2019-20 October 5th You must register for Self Assessment tax return on this date, which follows the end of a tax year that you need to send a tax return for. Note: As per the Indian laws, both financial year and assessment year starts on 1st  April and ends on 31st March. People often use AY and FY interchangeably and this sometimes leads to errors at the time of filing the ITR (Income Tax Return). Assessment year is the year following the financial year in which tax returns are filed for the income that was earned in the financial year. In simple terms, the year that comes after the financial year is known as “assessment year.” Both the years are a period of 12 months, starting from April 1 to March 30. To cover all these situations and uncertainties, having a pre-defined  AY can help taxpayers complete assessments and calculations easily after the applicable financial year closes. However, as we know his income will be assessed in the year following the financial year. The year falling next to a financial year is known as Assessment Year wherein the income of the Financial Year is assessed. Assessment year also begin… The assessment year is the year in which the earned income is assessed. If you have to file your income tax return for FY 2013-14, you will be writing your assessment year as 2014-15. Hum sabko bhut confusen hota hai ki ye FY aur AY qa hota hai. In other words, income earned in a financial year can’t be taxed before it is earned and hence the concept of AY becomes necessary. Prior: 1939 c 206 § 39; 1925 ex.s. To clear out the dilemma between AY and FY, we have listed AY and FY for recent years: Example 1: Mr. X earned income from April 2020 to December 2020, now, in this case, the financial year (FY) would be 2020-20201. 6,00,000 which is earned by him in the year 2017-18 which is known as Financial Year and it will be taxable in the year 2018-19 which is known, Get in touch with us to understand our services a little more. Ltd. HSN Code and GST Rate for Meat & Edible Offal of Animals, Assessment Year and Financial Year for recent years. 1st April 2018 to 31st March 2019). Change of Financial Year to Calendar Year as well as Assessment Year and Financial Year as the same. Term Assessment year is widely used in the context of ITR filing and payment of income tax. For instance, income earned in the Financial Year 2017-18 (i.e. Simply put, if you are filing a return this year, the financial year will be 2012-13. Since Income Tax is on income of a financial/ previous year or period, so tax filings and assessment can start thereafter. Like a financial year, the assessment year in India starts from April 1 and ends on March 31. Meaning of Financial Year (FY) – Financial year is the year in which you earn income. Meaning of Financial Year (FY) Hindi Meaning of Financial Year and Assessment Year? Financial year starts from 1st April and ends on 31st March (wherein there is income pertaining to the whole year or part of the year). What is the difference?Financial Vs Previous Vs Assessment Year. Assessment Year is the year in which one file income tax returns of the year prior to it (i.e. For the 2019/20 tax year, for instance, you must have registered by 5 October 2020. AY is the year in which returns are filed for the income earned in the previous financial year ended. Assessment year & Financial both begin on 1st April and end on 31st March. Now if you think for a moment, if the financial year for assessing your income tax ends on March 31st, then you can do the assessment and filing of income tax returns post this date. As per section 2(9) of the Income Tax Act, 1961 (for short ‘the Act’), the definition of assessment year is given as follows: “assessment year” means the period of twelve months commencing on the 1 st day of April every year. Financial Year). What is the previous year? To add, unforeseen situations like loss of business, change in job, new ventures, and more can come up anytime. Copyright © 2019 Masters India IT Solutions Pvt. A Financial year starts from 1st April and ends at 31st March. In this article, we have put together all the minute details about Assessment Year (AY) and Financial Year (FY). The terms Financial Year and Assessment Year have significant importance in the Income-tax Act, 1961. In 2018, the Myanmar Government changed the financial year starting from 1 October to 31 September from 2018 (“New FY”).However, this did not affect private and co-operative sectors, other than banks, financial institutions and stated-owned enterprises, and the financial year remained unchanged from 1 April to 30 March (“Old FY”). The global smart home solution market is expected to grow at a high rate to register a stellar CAGR of 20.4% throughout the forecast period. A financial year is the current year in which income is earned, and financial reporting is done. Why does an Income Tax Return (ITR) form have Assessment Year (AY)? The valuation of the global smart home solution market is projected to reach US$ 164.8 Bn by the end of the assessment year in 2025 from an estimated value of about US$ 37.2 Bn in 2017. The tax rate for the assessment year (AY) 2014-2015 are provided in a tabular form below. Both the terms have different meanings and usage. On the other hand, the financial year in which the tax liability on the income of the person is assessed is known as Assessment Year. In other words, AY is the succeeding year of the financial year. It is the year in which the income that one has earned in the financial year that is just ended is evaluated. The assessment year can also be explained as the year in which the income tax returns are filed for the earned in the previous financial year. The year in which your income is assessed and taxed by the income tax department is called the Assessment Year (AY). The assessment year contemplated in this title and the fiscal year contemplated in this title shall commence on January 1st and end on December 31st in each year. Equipping Modern Enterprises with Powerful GST, E-Way Bill & E-Invoicing Solutions. 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