Taxpayers should be aware of the difference between the Financial Year (FY) and Assessment Year (AY), especially those who need to file their Income tax returns. Many times, taxpayers get confused about the FY and AY while selecting the options for availing the E-filing services.
So, let’s understand both in detail:
Meaning of Financial Year
A Financial year is the period of 12 months, starting from April 1 to March 30. The taxpayers need to pay tax for a relevant financial year in which you earn income.
Meaning of Assessment Year
The Assessment Year is the year following 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.
|Period||Financial year||Assessment Year|
|1 April 2019 to 31 March 2020||2019-20||2020-21|
|1 April 2018 to 31 March 2019||2018-19||2019-20|
|1 April 2017 to 31 March 2018||2017-18||2018-19|
Explanation About Financial year (FY) and Assessment year (AY) from ITR perspective
From an income tax return/income tax perspective, FY is the year in which you earn an income, and AY is the year in which you have to evaluate the financial year’s income. On such an evaluation of income, you need to pay taxes in the AY only.
For example, if your financial year starts from 1 April 2019 to 31 March 2020, it is known as FY 2019-20 and AY 2020-21. Now, you much have earned income in FY 2019-20, and you will pay tax on that income in AY 2020-21.