Difference Between Assessment Year (AY) and Financial Year (FY)
Difference Between Assessment Year and Financial Year: A Simple Guide
In this post, We will look at the main difference between the Financial Year (FY) and the Assessment Year (AY). Understanding these concepts is essential for correct tax filing and compliance.
Let us look at these sections:
What is a Financial Year?
The financial year is when you make money, beginning on April 1 of one calendar year and ending on March 31 of the following year. It is commonly known as “F.Y.” For example, the financial year 2024-25 covers April 1, 2024 to March 31, 2025.
Tax planning and calculations are completed throughout the financial year, but the income tax return is filed the following year, known as the Assessment Year.
What is an Assessment year?
The Assessment Year (AY) follows the financial year (FY) and starts from April 1 to March 31. It is the year the money earned during the previous financial year is assessed and taxed.
For example, if your income was earned between April 1, 2022, and March 31, 2023, the Assessment Year is 2023-24. During AY 2023-24, you will file your income tax return for FY 2022-23.
Assessment and Financial Year in India for the Recent Years
| Period | Financial Year | Assessment Year |
| 1 April 2018 – 31 March 2019 | 2018-19 | 2019-20 |
| 1 April 2019 – 31 March 2020 | 2019-20 | 2020-21 |
| 1 April 2020 – 31 March 2021 | 2020-21 | 2021-22 |
| 1 April 2021 – 31 March 2022 | 2021-22 | 2022-23 |
| 1 April 2022 – 31 March 2023 | 2022-23 | 2023-24 |
| 1 April 2023 – 31 March 2024 | 2023-24 | 2024-25 |
What is the difference between the Assessment year and the Financial year?
The financial year is the period in which a person makes income. On the other hand, the assessment year is the year immediately following the financial year, when the previous year’s income is reviewed, taxes are paid, and the Income Tax Return (ITR) is filed.
For example, if the financial year spans from April 1, 2022, to March 31, 2023, it is known as FY 2022–23. The corresponding assessment year, which starts soon after the financial year ends, will be AY 2023-24.
Why does an ITR form have an assessment year?
Income tax forms include an assessment year because income earned during a financial year is taxed in the following year. The assessment year ensures proper evaluation since income cannot be taxed before it is earned. Taxpayers must select the correct assessment year when filing returns, as financial challenges can arise anytime during the year.
We have reached the end of this post. Please leave your questions in the comment area below.
FAQs
1. What is the current assessment year?
Ans: The current assessment year (AY) is 2024-25, which is applicable to the financial year (FY) 2023-24.
2. Which month does India's financial year end in?
Ans: In the instance of FY 2023-24, it is March 31, 2024. In India, the financial year ends on March 31st of each year, and the new financial year begins on April 1st.
3. Are the financial year and the previous year the same?
Ans: Yes, for ITR filing, the financial year and previous year are the same. For example, the Financial Year 2023-24 refers to the previous year 2023-24.
4. What is the full form of "AY"?
Ans: In general, most taxpayers use the term AY instead of its full form, Assessment Year.
5. What is the full form of FY?
Ans: In general, most taxpayers use the term FY instead of the full form, Financial Year.
