Assessment year

What is Assessment year?

An Assessment Year (AY) is the period during which a person files their income tax returns for the income earned in the preceding financial year. In simpler terms, it is the year in which the income earned during the financial year is assessed and taxed by the government.

Key Points about the Assessment Year:

  • Timeframe: The assessment year starts on April 1 and ends on March 31 of the following year. For example:

    • If you earned income between April 1, 2023, and March 31, 2024, the assessment year would be 2024–2025.

  • Relation to the Financial Year (FY):

    • The Financial Year (FY) refers to the period in which income is earned.

    • The Assessment Year comes immediately after the financial year and is when taxes are filed for the income earned during the FY.

  • Filing Tax Returns:

    • Taxpayers are required to declare their income and file income tax returns during the assessment year based on the income earned in the financial year.

  • Why is it Called Assessment Year?

    • During this period, the tax authorities assess the income declared, verify deductions or exemptions claimed, and determine the amount of tax payable or refundable.

Example:

  • Financial Year: 2023-2024 (Income earned between April 1, 2023, and March 31, 2024).

  • Assessment Year: 2024-2025 (Income tax return filed and assessed between April 1, 2024, and March 31, 2025).

By aligning income earned in a financial year with its corresponding assessment year, the tax system ensures transparency and compliance.

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