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What is a Financial Year?
The financial year is the calendar year in which you received your money. It begins on April 1st of each calendar year and ends on March 31st of the next calendar year. The word “financial year” is sometimes abbreviated as “F.Y.” An assessee must measure and plan taxes for the fiscal year, but the income tax return must be filed the next year or Assessment Year.
- The income earned in the present Financial Year (FY) 2020-21 is the income earned from April 1, 2020, to March 31, 2021.
- Any money earned by you from April 1, 2020, to March 31, 2021, is simply referred to as income earned in Financial Year (FY) 2020-21.
What is an Assessment Year?
The assessment year is the period (from April 1 to March 31) during which you are taxed on the money you receive in a given financial year. In the relevant assessment year, you must file your income tax return. The year immediately after the Financial Year is known as the Assessment Year. For instance, if you’re looking for a unique way to express yourself.
- In Assessment Year 2021-22, income gained in the current Financial Year 2020-21 (i.e. from April 1, 2020, to March 31, 2021) will be taxable (i.e. from 1st April 2021 to 31st March 2022).
- In Assessment Year 2020-21, income received in Financial Year 2019-20 (i.e. from April 1, 2019, to March 31, 2020) will be taxable (i.e. from 1st April 2020 to 31st March 2021).
The Indian Financial Year
In India, the fiscal year starts on April 1 and ends on March 31. AY 2021-22 will be the review year for FY 2020-21. In certain circumstances, the financial year may vary from the previous year.
Assessment and Financial Year in India for the Recent Years
|Period||Financial Year||Previous Year||Assessment Year|
|1 April 2018 to 31st March 2019||2018-19||2018-19||2019-20|
|1 April 2019 to 31st March 2020||2019-20||2019-20||2020-21|
|1 April 2020 to 31st March 2021||2020-21||2020-21||2021-22|
Difference Between AY and FY
A person’s financial year is the year in which he or she receives money for tax purposes. The assessment year is the year after the financial year in which the prior year’s revenue is assessed, tax is collected, and the ITR is filed. For example, the financial year beginning on April 1, 2020, and ending on March 31, 2021, is known as Financial Year 2020-21. The assessment year starts after the financial year ends, so AY 2021-22 will be the assessment year for F.Y. 2020-21.
Important Differences Between AY and FY
|Financial Year||Assessment Year|
|The financial year is the time period where income is earned.||The assessment year that follows is the financial year and the period in which tax returns are filed.|
|The financial year is when salaried professionals and senior citizens earn their money.||While AY is the time when the income that was earned in the financial year gets evaluated.|
|Taxation and evaluation are carried out in the AY for the income that has been earned in the financial year.||Income Tax Return Forms are specialized forms for the evaluation and taxation of FY income.|
|Income is always earned in the period known as the financial year it cannot be taxed prior to being earned.||After money has been earned by an individual it will be evaluated for the purpose of taxation in the latter, that is the AY.|
Why does ITR form have an Assessment Year?
Since the revenue for any financial year is calculated and taxed in the next year, the evaluation year, income tax forms include an assessment year. It is not possible to tax income until it is paid. Adverse circumstances may arise at any time during the year, whether at the start, center, or end. As a result, when filing income tax returns, it is now necessary to pick the Assessment year.
Financial and Assessment Year – FAQs
Q1. When should the taxpayer file an income tax return?
An income tax return should be filed in the Assessment Year, which is the year after the end of a financial year.
Q2. How to calculate the income and tax liability for the purpose of filing an income tax return?
You can figure out how much money you made for the whole fiscal year and then figure out how much tax you owe on that. When your income reaches Rs 2.5 lakh, you must file an income tax return.
Q3. How to pay the tax on my income?
Before you file an income tax return, you will pay your tax online.
Q4. When can I claim credit for TDS, advance tax? Did TCS pay or deducted income?
You will take credit for advance tax, TDS, and TCS charged during the financial year while filing your report.
Q5. What is the Assessment Year in the ITR filing?
It is not possible to tax income until it is paid. Uncertain circumstances may arise at any time during the year, whether at the start, center, or end. As a result, when filing income tax returns, it is now necessary to pick the Assessment year. Income gained in the current Financial Year 2020-21 (i.e. from April 1, 2020, to March 31, 2021) will be taxable in Assessment Year 2021-22.