Difference between AY and FY

THE EVALUATION OF THE PREVIOUS YEAR’S INCOME WILL BE DONE NEXT YEAR. THIS MEANS IT IS THE YEAR IN WHICH YOUR TAX LIABILITY WILL BE CALCULATED ON THE PREVIOUS YEAR’S INCOME

FINANCIAL YEAR

Financial and assessment year are the two terms you come across while filing your income-tax returns.

In income-tax form, it is the year in which you have earned the income.

Basically, the financial year is the previous year. For instance, if you are filing a return this year, the financial year will be 2017-18.

This means, you have earned the income between April 1, 2017 and March 31, 2018, which will be considered for FY2017-18.

All your documents such as Form 16 will have FY mentioned on it.

ASSESSMENT YEAR

This is the year in which you file returns.

For instance, if you have had an income between April 1, 2017 and March 31, 2018, the AY will be 2018-19.

The evaluation of the previous year’s income will be done next year.

This means it is the year in which your tax liability will be calculated on the previous year’s income. Your ITR form will have AY mentioned on it.

The income tax department uses the term AY. AY and FY are two different periods.

To remember it better, the logical way to look at it is that income tax department will be able to assess your income only after the end of the year.

Hence, assessment will be the following year of a financial year.

And a financial year will have to be completed for the year for which the income has to be assessed.

Hence, it will always be the previous year.