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Kotak e-Invest
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Ref. No. KLI/22-23/E-BB/492
A Financial Year (FY) is the period in which income is earned, typically from April 1 to March 31. An Assessment Year (AY) is the period following the Financial Year in which the income earned is assessed and taxed.
The terms “financial year” and “assessment year” are very different and should be clearly understood by taxpayers. If the assessment or financial year is incorrectly referred to, no message will be sent or received correctly. The words financial year and assessment year are decades old in terms of income tax. However, a lot of people are still uncertain about these two terms.
Many assessors and taxpayers mistakenly believe both phrases refer to the same thing when completing income tax returns.
Financial Year is the accounting year in which you receive income. It starts on April 1 of every calendar year and lasts until March 31 of the following year. The letter “F.Y.” sometimes shortens the term “financial year.” The income tax return must be submitted the next year or the Assessment year.
The assessment year is the timeframe (April 1 through March 31) in which you are subjected to tax on the money you earn in a specific financial year. You must file your income tax return during the relevant assessment year. The assessment year is the year that immediately follows the Financial Year.
From the perspective of tax, a financial year is a year that a person receives income, while, assessment year is the year after the financial year. It is the time when the previous year’s income is assessed, the tax gets due, and ITRs are filed. The table below will help you end the debate on the assessment year vs financial year.
| Financial Year |
Assessment Year |
| The time frame during which money is earned is the financial year. |
The financial year and time frame for filing tax returns is the assessment year that comes after. |
| Senior citizens and professionals on salaries make their money during the financial year. |
While AY is when the revenue earned throughout the financial year is assessed. |
| Income generated during this period is subject to tax in the following AY. |
Tax calculations and returns are based on income from the preceding FY. |
| Used for preparing financial statements and business planning. |
Used for submitting tax returns and paying taxes on income from the previous FY. |
The Assessment year and financial year close on March 31 and start on April 1. The financial year is when businesses, salaried professionals, and elderly citizens earn their money, while the next year, the accounting year, or AY, is when the revenue already earned is assessed.
For instance, financial year 2023–24 is the accounting year from April 1, 2023, through March 31, 2024. The assessment year starts after the financial year closes, so for FY 2023–24, AY 2024–25 will serve as the assessment year.
The evaluation year and income tax forms include an assessment year since revenue for any fiscal year is computed and taxed in the following year. Income cannot be taxed until it is received. Negative events can happen at any time, including at the beginning, middle, or end of the year. As a result, choosing the assessment year is required when completing income tax returns.
1
Yes, the previous year and financial year are the same for ITR purposes.
2
The distinction exists because the Financial Year (FY) is the period in which income is earned, while the Assessment Year (AY) is when this income is assessed for tax purposes, ensuring accurate tax filing based on the preceding FY.
3
Your Financial Year (FY) is determined by the period from April 1st to March 31st of the following year, during which you earn income. The Assessment Year (AY) begins immediately after the FY ends and is when you file tax returns based on income earned in the previous FY.
4
Missing the deadline for filing your tax return within the Assessment Year (AY) can lead to penalties and interest charges as per tax regulations. Filing on time is essential to avoid legal consequences and ensure compliance with tax laws.
5
For Non-Resident Indians (NRIs), the concept remains the same regarding the financial year (FY) and Assessment Year (AY). NRIs must report income earned in India during the FY and file tax returns for assessment in the subsequent AY, adhering to Indian tax laws applicable to their residential status.
6
Changes in tax laws impact the Assessment Year (AY) by altering tax rates, deductions, exemptions, and compliance requirements for taxpayers. Taxpayers must stay updated with current laws to accurately file their tax returns and benefit from any new provisions introduced for the respective AY.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
