Financial year and assessment year are two different but equally significant concepts that all taxpayers should be aware of. For example, material will not be sent out if an assessment year or financial year is mistakenly referred to. For decades, the terms “Financial Year” and “Assessment Year” have been used in the area of income tax. Despite this, many taxpayers are unsure about the distinction between the two terms. As a result of this confusion, many taxpayers / assessees have difficulty completing their tax returns because they assume both terms relate to the same thing. We will explain and answer any of our readers’ queries about the assessment year and financial year in order to help them file their income tax returns in a straightforward and hassle-free manner.
What is the meaning of “Financial Year”?
The calendar year in which you received the funds is the same as the financial year. Every year, it starts on the first day of April and ends on the final day of March. In certain contexts, the term “Financial Year” is referred to as “F.Y.”
In order to file a tax return for the current fiscal year, taxpayers must wait until the next year, known as the Assessment Year, to complete and submit their tax returns. The following is an example:
In the current Year of Assessment (YA) (FY) 2021-22, the money generated from April 1, 2021, through March 31, 2022, is included in the income earned. In addition, any income you get between April 1st, 2021, and March 31st, 2022, may be treated as income earned in Fiscal Year (FY) 2021-2022.
What is the Assessment Year?
The assessment year is the period of time (starting on April 1 and ending on March 31) during which the government taxes the money you earn in a specific fiscal year. You must file your income tax return before the due date for that year’s assessment. After the financial year, the evaluation year follows. The following is an example:
During the Assessment Year 2021-22, income earned during the current Financial Year 2020-21 (i.e. from April 1, 2020 to March 31, 2021) will be subject to taxation (i.e. from the 1st April 2020 to the 31st March 2021).
As of April 1, 2019, any income earned between April 1, 2019 and March 31, 2020 will be taxed in the Assessment Year 2020-21 (Financial Year 2019-20). (that is, from April 1, 2019 to March 31, 2020). For example, from April 1, 2020, to March 31, 2021.
Do you know the meaning of the term “Previous Year”?
In the context of income tax or income tax return preparation, the terms financial year and preceding year are used interchangeably. It is thus possible to refer to the financial year of 2020-21 as the previous (prior) financial year, and the income received in that year will be taxed in AY 2021-22.
What is the difference between the Financial Year and the Assessment Year when it comes to accounting?
When someone earns a profit or incurs debt, they are said to be in “financial year.” When the financial year is followed by an assessment year, the revenue and costs from the previous year are assessed, tax is paid, and an ITR is produced during this year..