Financial year and Assessment year-What is the difference?

While filing income tax returns, financial planners as well as Chartered Accountants, make use of these two terms, financial year and assessment year very often. In India, financial year (FY) commences from 1st April each year and ends on 31st March and the income generated in a particular financial year is filed with the tax authorities in the Assessment year.

Assessment year (AY) is the immediate year following the FY wherein income of the previous year or that particular FY is assessed. For instance, for the income accrued in FY 2013-2014, assessment year is 2014-2015. So, financial year is the previous year while assessment year is the current year when the income is being assessed for the last or previous year. In the AY, your total tax liability for the income earned in the previous financial year is evaluated and computed. Consequently, tax for the income earned in the previous year is paid in the current year.

For filing the income tax return for FY 2013-2014, the forms are listed under AY 2014-2015.

The confusion in the two terms is highly likely as each of the document provided for the purpose of tax filing or income tax return, including TDS certificate, form 26AS, form 16A, investment proofs and capital gains statement among others is available with respect to FY while the ITR form bears AY. However, it is to be noted that income for the given year will be assessed once the year ends.

Available recourse in case of wrong mention of AY on ITR

In case the income tax return is filed within the due date, wrong mention of AY can still be corrected by filing a revised return. The previously filed or original income tax return is then held void. Revised ITR with discrepancy in respect of assessment year can however be corrected at anytime during the assessment year.

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