Assessment year

What is an Assessment Year (AY)?

Assessment year (AY) is the period from April 01 to March 31 next year. During this period, your previous year’s income is taxed and assessed for income tax filing purposes. Since your income cannot be taxed prior to being earned, it will be assessed the following year right after the financial year ends. For example, your income from the financial year (1st April 2022 to 31st March 2023) will be taxed and assessed as soon as the financial year ends I.e., from 1st April 2023 to 31st March.

What is a Financial Year (FY)?

A financial year is the period that also starts from 1st April to 31st March the following year. This is the period when your income is earned. The income earned is taxed after the financial year ends. For example, the income you have earned from 1st April 2022 to 31st March 2023 will be called the Financial Year. After that, your AY (Assessment Year) begins.

AY and FY for recent years:

Period: April 1, 2023 – March 31, 2024

Financial Year: 2023 – 2024

Assessment Year: 2024 – 2025

Period: April 1, 2022 – March 31, 2023

Financial Year: 2022 – 2023

Assessment Year: 2023 – 2024

Period: April 1, 2021 – March 31, 2022

Financial Year: 2021 – 2022

Assessment Year: 2022 – 2023

What is the difference between AY and FY?

For income tax purposes, the financial year (FY) is the year in which you earn income. The assessment year (AY) is the year following the financial year in which you must evaluate the previous year’s income and pay taxes on it.

For example, let’s say your financial year is from April 1, 2020, to March 31, 2021. This period is known as FY 2020-21. The assessment year for the money earned during this period would begin after the financial year ends, which is from April 1, 2021, to March 31, 2022. Therefore, the assessment year AY would be 2021-22.

Step-by-step guide on filing taxes for the Assessment Year:

If you need to file your taxes for the Assessment Year, here is an easy guide to follow:

1. Collect all the documents related to your income, such as salary slips, bank statements, and investment proofs.

2. Choose the correct ITR form based on your income sources and category (ITR-1 to ITR-7).

3. Decide whether you want to file your taxes online or offline.

4. Create an account on the official Income Tax e-filing portal https://www.incometaxindiaefiling.gov.in/

5. Fill in the ITR form with accurate income and deduction details.

6. Link your Aadhaar or PAN card with your tax return, as it is mandatory.

7. Calculate your tax liability based on the income and deductions you have declared.

8. For online filing, upload the filled ITR form on the e-filing portal.

9. Complete the verification process for your return, which can be done electronically through Aadhaar OTP, EVC, or by sending a physical ITR-V to the CPC, Bengaluru.

10. Keep copies of your filed return, acknowledgments, and supporting documents for future reference.

What are the common mistakes to avoid when filing taxes for the assessment year?

tax filing tips for the assessment year

Common mistakes to avoid when filing taxes for the assessment year in India include:

  • Incorrect Personal and Financial Details.
  • Selecting the Wrong ITR Form.
  • Missing Income Sources.
  • Mismatched TDS Details.
  • Overlooking Deductions.
  • Incorrect Tax Calculation.
  • Non-Filing for Previous Years.
  • Late Filing and Penalties.
  • Not Verifying Your Return.
  • Neglecting Bank Account Disclosures.
  • Inadequate Documentation.
  • Mismatched TAN and PAN.
  • Inconsistent Declarations.
  • Failing to Review Before Submission.
  • Ignoring Gift Tax Rules

FAQs

1. What happens if I miss the deadline for the Assessment Year?

It is important to file your tax return on time in India. If you miss the deadline, you may have to pay late filing fees and interest on unpaid taxes. You may also lose deductions and face legal consequences. Filing late can also delay your tax refund and make it harder to file your return later. To avoid these financial and legal problems, make sure you file on time.

2. Can I revise my tax return after the Assessment Year has ended?

Yes, in India, you can revise your tax return after the Assessment Year has ended, but with certain limitations. If you filed your tax return on time, you can file a corrected version under Section 139(5) of the Income Tax Act within one year after the Assessment Year ends.

3. Why does an ITR form have AY?

The Assessment Year (AY) is a crucial component of the Income Tax Return (ITR) form, as it specifies the exact period during which the income is assessed, and tax filings are made. By aligning it with the relevant financial year, taxpayers and tax authorities can ensure clarity, consistency, and accuracy in tax calculations. This not only helps taxpayers to accurately report their income but also allows tax authorities to effectively enforce tax laws and regulations.

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