What is the Difference Between Assessment Year and Financial Year?

A financial year (FY) is a 12-month period during which you earn income and record your financial activities. It starts from 1st April and ends on 31st March of the following year. Conversely, an assessment year (AY) is the following year after FY in which the earned income in a particular FY is taxed. Both years start from the 1st of April and end on the 31st of March. For example, for the financial year 2025-26, the assessment year will be 2026-27.

In this blog, we will learn the difference between an assessment year and a financial year.

What is a Financial Year?

A financial year or FY is a 12-month period that governments and businesses use for accounting and taxation purposes. It is the period during which you earn your income and record your financial activities. An FY starts on the 1st of April and ends on the 31st of March of the following calendar year.

What is an Assessment Year?

The assessment year, or AY, is the year that comes right after the financial year. It is the period in which the earned income is assessed and taxed. After which, the taxpayer is required to file the tax returns, claim deductions, and settle any due taxes. An AY starts from the 1st of April and ends on the 31st of March.

For example, income earned in the Financial Year 2025-26 (i.e., from 1st April 2025 to 31st March 2026) will be taxed in the Assessment Year 2026-27 (i.e., from 1st April 2026 to 31st March 2027).

Difference Between the Assessment Year and the Financial Year

The table below highlights the difference between AY and FY:

What are the AY and FY for Recent Years?

The table below lists the Assessment Year (AY) and Financial Year (FY) for recent years:

Why Does an ITR Form Have an Assessment Year?

Income Tax Return forms have an AY because income for any specific financial year is identified and taxed in the assessment year. Since the income earned in a financial year cannot be taxed before it is earned, it's taxed in the next year.

Situations like job loss, job change, new investment, etc., can arise in the middle or end of the FY, so the income earned in a FY cannot be identified before the end of the FY. This is why the assessment year can start only after the end of the financial year. Thus, IT forms include an AY, and taxpayers must choose an AY when filing their income tax returns. 

What is the Financial Year and Assessment Year in Hindi?

The Hindi names for the financial year and the assessment year are:

• Financial Year: वित्तीय वर्ष
• Assessment Year: निर्धारण वर्ष

To Conclude

Financial Year is the year in which the income is earned, while the following AY is when that income is assessed and taxed. While filing your income tax return, you need to have a clear understanding of which financial year the income was earned in and under which assessment year it will be taxed. You must be aware of both terms to ensure compliance and prevent penalties, legal complications, and issues with your Income Tax Return (ITR). Moreover, to ensure 100% compliance while filing the ITR, seek assistance from an expert at Savetaxs.

At Savetaxs, we have an entire team of experts who can help you stay in adherence with the rules while filing the ITR. They can help you in understanding the correct FY and AY and other taxation, financial, repatriation, and investment issues. Connect with us right away, as we are working 24/7 across all time zones.