Assessment year is the year in which your income earned in the previous financial year is assessed and taxed by the income tax department. It starts from 1st April and ends on 31st March of the next year. You have to file your income tax return for a particular financial year in the corresponding assessment year. You have to select the correct assessment year while filing your return online, otherwise you may face problems with your taxes.
If you are a taxpayer in India, you might have come across the terms financial year (FY) and assessment year (AY) while filing your income tax returns. But do you know what they mean and how they differ from each other? In this blog post, we will explain the meaning and difference between FY and AY, and why they are important for tax purposes.
Financial Year (FY) vs Assessment Year (AY)
A financial year (FY) is the period of 12 months from 1st April to 31st March of the next year, in which you earn your income. For example, the current financial year is FY 2021-22, which started on 1st April 2021 and will end on 31st March 2022.
An assessment year (AY) is the period of 12 months from 1st April to 31st March of the next year, in which your income earned in the previous financial year is assessed and taxed by the income tax department. For example, the current assessment year is AY 2022-23, which started on 1st April 2022 and will end on 31st March 2023.
The assessment year follows the financial year, as your income can only be taxed after it is earned. Therefore, you have to file your income tax return for a particular financial year in the corresponding assessment year. For example, you have to file your income tax return for FY 2021-22 in AY 2022-23.
Why is Assessment Year Important?
The assessment year is important because it determines the following things:
- The income tax return form that you have to use to file your income tax return.
- The income tax rates and slabs that are applicable to your income.
- The deductions and exemptions that you can claim to reduce your taxable income.
- The due date for filing your income tax return and paying your tax liability.
- The penalties and interest that you may have to pay for late filing or late payment of taxes.
How to Select Assessment Year While Filing Income Tax Return?
While filing your income tax return online, you have to select the correct assessment year from a drop-down menu. You have to select the assessment year that corresponds to the financial year for which you are filing your return. For example, if you are filing your return for FY 2021-22, you have to select AY 2022-23.
If you select the wrong assessment year, your return may be rejected by the income tax department or you may face difficulties in getting your refund or adjusting your taxes. Therefore, it is advisable to check the assessment year carefully before submitting your return.
What are the penalties for not filing an income tax return?
If a taxpayer fails to file an income tax return within the due date, he/she will be liable to pay a penalty. The quantum of penalty will depend on the duration of delay in filing the return. The following table shows the penalties for not filing an income tax return:
| Duration of delay | Penalty |
|---|---|
| Up to 30 days | ₹500 |
| More than 30 days but less than 60 days | ₹1,000 |
| More than 60 days but less than 90 days | ₹2,000 |
| More than 90 days | ₹5,000 |
FAQ About Assessment Year
An assessment year is the year in which the income earned in the previous financial year is assessed and taxed. For example, the assessment year for the financial year 2022-23 is 2023-24.
A financial year is a period of 12 months, starting from 1st April and ending on 31st March. An assessment year is the year that follows the financial year in which the income earned in the previous financial year is assessed and taxed.
In India, all individuals, Hindu Undivided Families (HUFs), companies, firms, and trusts are required to file an income tax return if their total income exceeds the basic exemption limit. The basic exemption limit for the financial year 2022-23 is as follows:
Individuals: ₹2,50,000
HUFs: ₹3,00,000
Companies: ₹2,50,000
Firms: ₹3,00,000
Trusts: ₹1,00,000
The last date to file an income tax return for the financial year 2022-23 is 31st July 2023. However, there are certain categories of taxpayers who are allowed to file their income tax return beyond the due date. These categories include:
Taxpayers who are unable to file their return within the due date due to unavoidable circumstances
Taxpayers who are serving in the armed forces
Taxpayers who are residing abroad
There are several benefits of filing an income tax return, including:
Claiming tax deductions and exemptions
Set off and carry forward of losses
Obtaining a Permanent Account Number (PAN)
Applying for a loan
Applying for a government job
Applying for a visa
