Difference Between Financial Year (FY) & Assessment Year (AY)

Financial Years (FY) and Assessment Year (AY) are the most common terms in the Income Tax Act that every taxpayer must know. But some taxpayers get confused between the financial year and assessment year.

In this blog, we’ll dive deeper to avoid the confusion and understand the difference between these two. Are you ready? Let’s go!

What is the Financial Year (FY)?

Financial Year is also known as fiscal year or accounting year. It is a 12-month period in which the income is earned. This period is used by the government and businesses for budgeting and accounting purposes.

The financial year starts on 1st April and ends on 31st march of the following year. For example, FY 2023-24 started on 1st April, 2023 and ended on 31st March 2024.

What is the Assessment Year (AY)?

Assessment Year (AY) is the year in which taxpayers assess and file their income tax returns for the income earned in the preceding financial year. Assessment year starts when the financial year ends.

Both AY and FY start on 1st April and end on 31st March. To give you an example, the assessment year for FY 2023-24 will be AY 2024-24.

AY and FY for Recent 10 Years

The following table will help you understand the difference between FY and AY even more clearly.

Period	Financial Year (FY)	Assessment Year (AY)
1 April, 2023 - 31 March, 2024	FY 2023-24	AY 2024-25
1 April, 2022 - 31 March, 2023	FY 2022-23	AY 2023-24
1 April, 2021 - 31 March, 2022	FY 2021-22	AY 2022-23
1 April, 2020 - 31 March, 2021	FY 2020-21	AY 2021-22
1 April, 2019 - 31 March, 2020	FY 2019-20	AY 2020-21
1 April, 2018 - 31 March, 2019	FY 2018-19	AY 2019-20
1 April, 2017 - 31 March, 2018	FY 2017-18	AY 2018-19
1 April, 2016 - 31 March, 2017	FY 2016-17	AY 2017-18
1 April, 2015 - 31 March, 2016	FY 2015-16	AY 2016-17
1 April, 2014 - 31 March, 2015	FY 2014-15	AY 2015-16

Difference Between Financial Year (FY) and Assessment Year (AY)

Let’s understand the difference with the help of an example. Amit is working as a software developer in an MNC with an office in Bangalore. He earns 12 LPA per annum. You must be aware that anyone and everyone who earns or receives an income is liable to file ITR no matter if his/her income is taxable or not.

According to the Income Tax Act, FY is the year (1st April - 31st March) in which Amit has earned the income and AY is the year in which he’ll be filing an ITR and his income will be taxed.

Why Does ITR Forms Contain AY and Not FY?

ITR forms contain assessment year and not financial year because tax returns are filed and assessed for the period immediately following the financial year.

The assessment year provides a reconciliation period for taxpayers to rectify discrepancies, claim deductions, and settle tax liabilities before final assessment by tax authorities. This practice aligns with legal requirements, ensures consistency, and simplifies the tax filing process for both taxpayers and authorities.

FAQs

Q1. What is the difference between financial year and assessment year?

The financial year is the 12-month period in which the income is earned and the assessment year is the 12-month period in which the earned income is assessed and taxed. Both years start on April 1st and end on March 31st.

Q2. Is there any difference between fiscal year and financial year?

No, both mean the same thing.

Q3. What is the current FY in India?

The current financial year (FY) is 2023-24.