Assessment Year and Financial Year: We cannot afford to make mistakes while filing the Income Tax Returns. Therefore it is important for one to file the ITR with utmost care because even a small mistake in ITR might lead the person to pay a penalty or fine. However, it’s quite common we get confused with terms such as assessment year, financial year, or previous year while filing the Income Tax Returns and end up making mistakes. And that is the reason, we have to cross-verify when we come across these confusing terms before filing the ITR. So to help you understand the term Assessment Year (AY) and Financial Year (FY), here is a detailed article where the AY & FY 2020-21 ITR terms are explained in detail. Read on to find out.
Difference Between Financial Year & Assessment Year
Before getting into the differences between financial and assessment year, let’s first understand what is Financial Year & Assessment Year:
What is Financial Year 2020-21?
The financial year is the year in which you received or earned the income. Financial Year begins on 1st April 1st of each calendar year and ends on 31st March of the subsequent calendar year. The word “financial year” is often abbreviated as “F.Y.” Financial year is otherwise called Fiscal Year.
Any taxpayer must estimate and plan taxes for the current fiscal year, but the income tax return must be filed the preceding year or Assessment Year.
Example: The income you earned from 1st April 2020 to 31st March 2021 is the income that you have earned in the financial year (FY) 2020-21.
What is Assessment Year 2020-21?
The assessment year commences from 1st April and ends on 31st March of the preceding calendar year. Assessment year is the year in which the income earned by you in a particular financial year is taxed. Any individual will have to file their income tax return to the suitable assessment year. The assessment year is the year that immediately follows the fiscal year and usually abbreviated as “A.Y.”
Example: The income you earned in the financial year (FY) 2020-21 is taxable in the year Assessment year (AY) 2021-22. (1st April 2021 to 31st March 2020).
What is the Previous Year 2020-21?
Another important term that you may come across while filing the ITR is the previous year. The assessment year, as previously stated, is where your income is assessed and taxed. This evaluation and tax assessment are based on your income from the previous year, also known as the fiscal year. Thus Previous year is nothing but the financial year.
Assessment Year and Financial Year For Recent Years
To help you understand the differences between Assessment Year and Financial Year, we’ve compiled a list of AY and FY for recent years. Going through the table will help you surmise the AY and FY in detail.
|1st April 2020 to 31st March 2021
|1st April 2019 to 31st March 2020
|1st April 2018 to 31st March 2019
|1st April 2017 to 31st March 2019
|1st April 2016 to 31st March 2017
Important Things To Keep In Mind While Filing ITR – AY & FY 2021
While filing the ITR, one will have to carefully understand the terms what is AY & FY and fill accordingly. Some of the important fields which one will have to keep in mind while filing an ITR are given below:
- One should first understand the term AY and FY are completely two different things before filing and ITR.
- The term Assessment Year (AY) will always be used on ITR forms and thus it important for individuals to not confuse with FY.
- Taxpayers referring to the documents in ITR forms such as Form 16A, Form 26AS, capital gains statement, TDS must all be for the fiscal year.
- The income tax for any financial year will be assessed only when the financial or fiscal year comes to an end.
Assessment Year & Financial Year Example
Let us understand the difference between Assessment Year (AY) and Financial Year (FY) with an example.
Consider, Mr. Kumar wants to file the ITR forms for the financial year 2020-2021. Then the assessment year for which the ITR will be filed by Kumar will be AY 2021-2022. So, here the ITR form will be used for Kumar’s income tax return for the income earned between 1st April 2020 to 31st March 2021 which falls under the Financial Year FY 2020-21 or AY 2021-22.
FAQs on Assessment Year & Financial Year
The frequently asked questions on Assessment and Financial Year (AY & FY) are given below:
Q. What is the assessment year for the financial year 2018-19?
A. The assessment year for the financial or fiscal year of 2018-19 is 2019-2020.
Q. What is the period of the assessment year?
A. The period of the assessment year commences from 1st April 2021 of any calendar year and ends on 31st March of the preceding calendar year.
Q. Is the assessment year and financial year the same?
A. No, the assessment year and financial year are two different things. FY is the fiscal year in which you earn an income for tax purposes. AY is the year following the fiscal year in which you must evaluate and pay taxes on the previous year’s income.
Q. When can I file my ITR for AY 2020-21?
A. You can file the ITR for AY 2020-21 since the financial year of 2019-20 was concluded on 31st March 2020.
Now that you are provided with all the necessary information on the difference between assessment year and financial year and we hope this detailed article is helpful to you. If you have any queries on AY or FY, ping us through the comment box below and we will get back to you as soon as possible.