Introduction:

Difference Between FY and AY Navigating the complexities of the Indian taxation system often leads to confusion, especially regarding the distinction between the assessment year and the financial year. Difference between FY and AY This blog aims to clarify the disparity between the assessment year and the financial year, emphasizing their significance and implications for taxpayers across India.

Financial year:

A Financial Year begins  from April 1st of one calendar year to March 31st of the subsequent calendar year. For instance, the financial year 2022-23 commenced on April 1st, 2022, and concludes on March 31st, 2023.

For accounting purposes, the income accrued by individuals, businesses, or organizations in India during a financial year is recognized as their income for that particular period.

Assessment Year:

The Assessment Year begins  from April 1st to March 31st, during which you are taxed on the income earned in the corresponding financial year. It is during this relevant assessment year that you are required to file your income tax return. The assessment year is the year directly following the financial year.

In Assessment Year 2023-24, income earned during the current Financial Year 2022-23 (from April 1, 2022, to March 31, 2023) will be subject to taxation (i.e., from April 1, 2023, to March 31, 2024).

Financial Year and Assessment Year: Difference Between FY and AYFY and AY

Period	Financial Year	Assessment Year
1 April 2022 to 31 March 2023	2022-23	2023-24
1 April 2021 to 31 March 2022	2021-22	2022-23
1 April 2020 to 31 March 2021	2020-21	2021-22

Difference Between AY and FY: 

FINANCIAL YEAR	ASSESSMENT YEAR
The financial year is the designated period during which income is generated or earned.	The assessment year, which follows the financial year, is the timeframe during which tax returns are filed.
Taxation and evaluation are conducted in the assessment year for the income earned during the financial year.	Income Tax Return Forms are specialized forms used for the assessment and taxation of income earned during the financial year.
The financial year is the period during which salaried professionals and senior citizens earn their income Difference between FY and AY.	The assessment year is the period during which the income earned in the financial year is evaluated.
The financial year spans from April 1st to March 31st of each calendar year.	The assessment year is the year immediately succeeding a specific financial year.
Income is earned during the period known as the financial year and cannot be taxed before it is earned.	Once an individual earns income, it is evaluated for taxation purposes in the subsequent period, known as the assessment year (AY).

Why do ITR Forms have an Assessment Year: 

Your income for a particular financial year is evaluated and taxed in the assessment year, which is why your ITR (Income Tax Return) form is assigned an AY. What is Assessment Year? Difference between FY and AY Income earned in a fiscal year is not taxable until it is earned, hence it becomes taxable in the following year.

Situations such as new investments, job changes, and loss of employment can occur by the middle or end of a fiscal year. Additionally, your earnings during a fiscal year may not be accurately known until the fiscal year concludes. This is why evaluations typically commence shortly after the fiscal year ends.

Final Word: 

While an assessment year and a financial year are closely related concepts, they serve distinct purposes. The financial year pertains to the period during which income is earned and expenses are incurred. In contrast, the assessment year refers to the year in which the income earned during the preceding financial year is assessed and taxed. It is crucial for individuals and businesses to understand the difference between an assessment year and a financial year to effectively manage their tax liabilities and plan their finances.