Financial Year (FY) and Assessment Year (AY) are commonly used terms in Income Tax, yet many taxpayers mix them up. The AY always follows the FY and is the period during which taxes on income earned in the previous year are computed and paid.
This section clarifies what a financial year and an assessment year mean, along with the main distinctions between them.
What is a Financial Year?
A Financial Year (FY) refers to the 12-month period from 1 April to 31 March during which your income is earned and recorded.
What is an Assessment Year?
The Assessment Year (AY) is the year immediately succeeding the FY.
During this year, income earned in the FY is assessed, taxes are calculated, and income tax returns are filed.
Both AY and FY run from 1 April to 31 March. For example, income earned in FY 2024-25 will be assessed in AY 2025-26.
AY and FY for Recent Years
| Period | Financial Year | Assessment Year |
| 1 April 2024 – 31 March 2025 | 2024-25 | 2025-26 |
| 1 April 2023 – 31 March 2024 | 2023-24 | 2024-25 |
| 1 April 2022 – 31 March 2023 | 2022-23 | 2023-24 |
| 1 April 2021 – 31 March 2022 | 2021-22 | 2022-23 |
| 1 April 2020 – 31 March 2021 | 2020-21 | 2021-22 |
What is the Difference Between AY and FY?
For tax purposes, the Financial Year is the period in which you earn income. The Assessment Year is the following year, when that income is reviewed and tax liability is determined.
So, if the FY runs from 1 April 2024 to 31 March 2025, it is FY 2024-25.
The year after this, from 1 April 2025 to 31 March 2026, becomes AY 2025-26 for assessing income earned in FY 2024-25.
Why Does an ITR Form Have an AY?
Income for any financial year is reviewed and taxed in the assessment year, which is why income tax return forms are based on the AY. Since income cannot be taxed before it is actually earned, taxation takes place in the year that follows the financial year.
Situations such as job loss, job changes, or new investments may occur during or near the end of the financial year. Additionally, the exact income for an FY is known only after it concludes. For this reason, assessment can begin only once the financial year is over. Therefore, taxpayers must choose the relevant AY when filing their income tax returns.
What Are Financial Year and Assessment Year Called in Hindi?
The Financial Year (FY) is referred to as वित्तीय वर्ष, and the Assessment Year (AY) is known as निर्धारण वर्ष in Hindi.
FAQs
1. How do I calculate my income and tax liability for filing an income tax return?
Compute your total income earned during the entire financial year and determine the applicable tax on it. You are required to file an income tax return if your income crosses the basic exemption limit:
- ₹2.5 lakh for individuals below 60 years
- ₹3 lakh for individuals aged 60–80 years
- ₹5 lakh for individuals above 80 years
Under the new tax regime, the exemption limit is ₹3 lakh for all taxpayers.
2. Can I claim credit for TDS, advance tax, or TCS deducted from my income?
Yes, while filing your return, you can claim credit for TDS, TCS, and advance tax paid during the financial year.
3. What is the current Assessment Year?
The current assessment year is AY 2025-26.
4. Are Financial Year and Previous Year the same?
Yes, for income tax return purposes, the terms Financial Year and Previous Year refer to the same period. For example, Previous Year 2024-25 is the same as Financial Year 2024-25.
5. How can I pay tax on my income?
Income tax can be paid online before submitting your income tax return.
6. What happens if I make a mistake in my ITR?
If you realize an error after filing, you can revise your return within the timeline prescribed for the assessment year.
7. Do I need to file an ITR if my income is below the exemption limit?
Filing is not mandatory in such cases, but you may still file voluntarily—for example, to claim refunds or for financial documentation.
8. Is it necessary to report income from all sources?
Yes, you must disclose income from all sources, such as salary, business, house property, interest, or capital gains.
9. Can I carry forward losses if I file my return late?
Certain losses can be carried forward only if the return is filed within the due date.
10. How do I know which ITR form to use?
The applicable ITR form depends on your income type, income sources, and residential status.
