Differences between Assessment & Financial Year | Akrivia HCM

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 

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.