FINANCIAL YEAR AND ASSESSMENT YEAR
Filing income tax (I-T) returns is one of the routine things that you do every year. Most people file I-T returns either through a chartered accountant or a financial planner. But if you take the effort of filing it on your own, you must have noticed that you come across the terms—financial year (FY) and assessment year (AY).
What is financial year while filing returns?
In Income Tax Act terminology, financial year is termed as previous year. It is the year in which taxpayer earns income. Simply put, if you are filing a return for this year, the financial year will be 2016-17.
For example, if you have had an income between 1 April 2016 and 31 March 2017, then 2016-17 will be referred to as Financial Year or Previous Year.
What is assessment year?
It is the year immediately succeeding to the Financial Year and in which you should assess you Income and file returns. It is the year in which the income that you have earned in the financial year that just ended will be evaluated.
For example, if you have had an income between 1 April 2016 and 31 March 2017, 2017-18 will be the AY. Simply put, it is the year in which your tax liability will be calculated on the previous year’s income.
Why the confusion?
If you look at the ITR form, only assessment year will be mentioned. Typically all documents that you refer to in ITR form—tax deduced at source form, capital gains statement, your Form 16A and Form 26AS—will be of Financial Year.
Simple Example for Financial years and Assessment Years
For F.Y 2014-15 : A.Y 2015-16
For F.Y 2015-16 : A.Y 2016-17
For F.Y 2016-17 : A.Y 2017-18
For F.Y 2017-18 : A.Y 2018-19
Care need to be taken while filing Income Tax returns, payment of Income Tax and TDS as it may lead to additional work to be done which will gets you unwanted struggles. It is recommended that you double check the year with your chartered accountant or tax practitioner in case you are confused before filing for I-T returns.