What is the assessment year?

The assessment year is the year immediately following the prior financial year. It is the year in which income earned in the previous FY is assessed for the tax liability. The time period starts from April and ends in March.

Difference between assessment and financial year

The main difference between the assessment year and the financial year is that the AY is used to assess the tax liability on the income earned in the preceding financial year, while the financial year is used for financial management and accounting purposes.

Examples 

Length of period

Financial year Assessment year

01/04/2022 to 31/03/2023  

2022 to 2023 2023 to 2024
01/04/2021 to 31/03/2022 2021 to 2022

2022 to 2023

01/04/2020 to 31/03/2021 2020 to 2021

2021 to 2022

Purpose of Assessment Year in ITR form

Since income cannot be taxed until earned, the tax is assessed immediately after the FY ends.

It is also impossible to precisely predict the income earned in a financial year before the year ends. Therefore, taxpayers have to select an AY while filing their income tax returns.

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