Difference Between Calendar Year, Financial Year and Assessment Year
Many taxpayers get confused between Calendar Year (CY), Financial Year (FY) and Assessment Year (AY). Treating them as the same can lead to mistakes while filing Income Tax Returns (ITR).
What is a Calendar Year (CY)?
A Calendar Year starts on 1st January and ends on 31st December every year.
📌 Example:
Calendar Year 2024 = 1 Jan 2024 to 31 Dec 2024
What is a Financial Year (FY)?
A Financial Year (FY) is the accounting year in which income is earned.
In India, it starts on 1st April and ends on 31st March.
📌 Example:
FY 2023-24 = 1 Apr 2023 to 31 Mar 2024
What is an Assessment Year (AY)?
An Assessment Year (AY) is the year immediately after the Financial Year, in which the income earned during FY is assessed and taxed.
Both FY and AY run from 1st April to 31st March.
📌 Example:
FY 2021-22 → AY 2022-23
Difference Between Financial Year and Assessment Year
Why Does ITR Form Ask for Assessment Year (AY)?
ITR forms mention Assessment Year because income earned in a financial year cannot be taxed before the year ends.
Income can change during the year due to:
-
job change
-
loss of employment
-
bonus or incentives
-
new investments
-
business profit/loss changes
Since the final income is known only after FY ends, the tax department assesses it in the next year, i.e., the Assessment Year
