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Guilherme Mazui

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What is the Difference Between Assessment Year and Financial Year?

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The difference between Assessment Year (AY) and Financial Year (FY) lies in the period when income is earned and when it is assessed for taxation purposes.

  • Financial Year (FY): This is the period in which a person earns income for tax purposes. It typically runs from April 1st of a calendar year to March 31st of the following calendar year. For example, FY 2022-23 refers to the fiscal year that runs from April 1, 2022, to March 31, 2023.
  • Assessment Year (AY): This is the period that follows the Financial Year, during which the income earned in the previous year is assessed, taxes are due, and the filing of Income Tax Returns (ITRs) takes place. Both the Assessment Year and the Financial Year begin on April 1st and end on March 31st. For example, the Assessment Year for any income earned between April 1, 2022, and March 31, 2023, would be 2023-24.

In summary:

  • The Financial Year is when income is earned and taxes are planned.
  • The Assessment Year is when the income earned in the previous year is assessed, taxed, and Income Tax Returns are filed.
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  • What is the Difference Between Assessment Year and Financial Year?
  • Comparative Table: Assessment Year vs Financial Year

    • Comparative Table: Assessment Year vs Financial Year

    The Financial Year (FY) and Assessment Year (AY) are two distinct periods in the context of income tax and financial reporting. Here is a table summarizing the differences between them:

    Period Financial Year (FY) Assessment Year (AY)
    Date Starts on April 1st and ends on March 31st (e.g., FY 2022-23: April 1st, 2022 - March 31st, 2023) Starts on April 1st and ends on March 31st (e.g., AY 2023-24: April 1st, 2023 - March 31st, 2024)
    Income Generation Income is generated during the FY The income earned during the FY is assessed and taxed during the AY
    Purpose Financial Year is used for company annual reports, stock reports, analysis of financial condition, and taxation Assessment Year is mainly used for tax assessment and taxation purposes
    Investment Deductions & Exemptions In the FY, individuals pay for their investments and savings schemes Individuals submit proof of investments made in the previous FY for assessment in the AY

    For example, if you earned income from April 1st, 2022, to March 31st, 2023 (FY 2022-23), you would file your income tax return in the Assessment Year 2023-24.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.