A financial year FY is the period between 1st April to 31st March. The financial year is the year in which a taxpayer earns his income. This income is subject to tax in the very next year known as the assessment year. An assessment year starts just after the financial year. In an AY the income of a taxpayer is assessed and tax liability arises.
The income that you have earned during the financial year under the different heads of income is put to tax and assessment during the AY. Now, why is quoting a correct AY so important. This is because when you quote an incorrect AY you actually quote an incorrect financial year. An incorrect financial year means that you have earned the income in a different year, you are filing your income tax return incorrectly and paying your taxes for a financial year in which you have not actually that income.
No, the financial year and assessment year is not the same. The financial year is the year in which a taxpayer earns an income, incurs expenses, and makes investments. The assessment year is the succeeding year in which the income earned in the financial year is put to tax and evaluation. Both the years begin with 1st April and end with 31st March of the next year. The fiscal year across the globe usually starts from 1st January and ends on 31st December.
However this period differs from country to country. India both the fiscal year and the financial year start from 1st April and end on 31st March. Since income for any particular financial year is evaluated and taxed in the assessment year, income tax return forms have AY.
Income earned in a financial year cannot be taxed before it is earned. Scenarios like loss of job, job change, new investments etc. Also, the income earned in a financial year cannot be exactly known before the end of the financial year. This is why the assessment can start only after the financial year ends. Hence, taxpayers have to select AY while filing their income tax returns. A taxpayer should file an income tax return in the Assessment Year, which is the year following the closure of a financial year.
You should calculate your income for the full financial year and calculate the tax thereon. You need to file an income tax return when your income exceeds Rs 2.
You can pay the tax online before filing the income tax return. New tax regime-Section BAC. Thank you for your response. The taxes collected are basically, collected for the Previous year but in the Assessment Year.
The previous year is either less than 12 or equal to 12 months while the assessment year is always a complete period of 12 months.
The differentiation between the previous year and the assessment year becomes very important to understand the basic concepts and principles of tax collection and to assess the data more efficiently. When talking about the present, the financial year preceding the current financial year is usually the Previous Year and the current year itself is the Assessment Year. Skip to content While creating databases for various reasons or specifically for Income Tax records, the time period is a must.
What is Previous Year? What is Assessment Year? Main Differences Between Previous Year and Assessment Year The previous year is the year for which the data of activity and income is collected and compiled whereas the assessment year is the year in which Income Tax is calculated and collected. The previous year is either less than or equal to 12 months while the assessment year is always 12 months long. Assessment of taxes requires 12 months time as different stage are undertaken in specific periods while Previous year can be shorter if the sources of Income were active partially during the financial year.
When we talk about paying taxes, usually the year preceding the current financial year is the previous year while the current year itself is the assessment year. Previous Year is important to collect data regarding the sources of Income and their activity while the Assessment year is important for the assessment of Income Tax revenue by the Government. The actual transactions and data collection take place in the previous year while the calculation and collection of taxes by the Government happens in the Assessment Year.
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