Difference between Assessment Year (AY) and Financial Year (FY)

Many Taxpayers get confused between the terms “Assessment Year (AY)” and “Financial Year” (FY). This confusion leads to mistakes while filing their Income tax returns. Hence it is very important to understand the difference between the two. As per Income-tax Act 1961:

Financial Year:  Financial Year (FY) is the period between 1 April and 31 March of any given year. It is the year in which you earn income and pay tax on it. The previous year is the same as the financial year.

For Example:

• The financial year for the AY 2020-21 is 2019-20
• The financial year for the AY 2019-20 is 2018-19
• The financial year for the AY 2018-19 is 2017-18

Assessment Year: Assessment year (AY) is the year following the financial year, in which your income is assessed. This period lasts from 1 April to 31 March of any given year. It is the year in which you file your income tax returns for the taxes paid in the relevant financial year.

For Example:

• The assessment year for the FY 2019-20 is 2020-21
• The assessment year for the FY 2018-19 is 2019-20
• The assessment year for the FY 2017-18 is 2018-19

For the current financial year i.e. FY 2021-22, the Assessment year is 2022-23 So, in a nutshell, you can say the Assessment year is the year succeeding the Financial year.