{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/trends\/difference-between-financial-year-and-assessment-year\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/trends\/difference-between-financial-year-and-assessment-year\/","headline":"Financial Year vs. Assessment Year: What\u2019s the Difference and Why It Matters?","name":"Financial Year vs. Assessment Year: What\u2019s the Difference and Why It Matters?","description":"Ever found yourself scratching your head while filing taxes, wondering whether to enter the Financial Year (FY) or the Assessment Year (AY)? You\u2019re not alone! Many taxpayers mix up these terms, leading to errors in tax filing. But here\u2019s the deal. Understanding the difference between FY and AY is crucial. It ensures that you fill...","datePublished":"2025-03-26","dateModified":"2025-03-26","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/#Person","name":"CONVONIX Antony","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind_bank_pfx_team_indperformics-com\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/7d15b864167d3868c12ffdda340cc1c9?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Different-Between-Financial-Year_.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/Different-Between-Financial-Year_.jpg","height":288,"width":764},"url":"https:\/\/www.indusind.com\/iblogs\/trends\/difference-between-financial-year-and-assessment-year\/","about":["Trends"],"wordCount":1487,"articleBody":"Ever found yourself scratching your head while filing taxes, wondering whether to enter the Financial Year (FY) or the Assessment Year (AY)? You\u2019re not alone! Many taxpayers mix up these terms, leading to errors in tax filing.But here\u2019s the deal. Understanding the difference between FY and AY is crucial. It ensures that you fill out your Income Tax Return (ITR) correctly and avoid unnecessary hassles. In this blog, we\u2019ll break it down in the simplest way possible, so you never mix them up again!What is a Financial Year (FY)?A Financial Year (FY) is the 12-month period in which you earn your income. It starts on April 1st and ends on March 31st of the following year.Example: If you earned income between April 1, 2023, and March 31, 2024, your Financial Year is 2023-24. Think of it as the earning period. All your salary, business income, or any other sources of earnings during this time fall under the Financial Year.Also Read: Financial Year-End Checklist 2025: Smart Moves to Maximise Savings & Plan AheadWhat is an Assessment Year (AY)?An Assessment Year (AY) is the year in which you file taxes for the income earned in the previous Financial Year. During this time, the government assesses your earnings and determines the tax you owe.Example: For income earned in FY 2023-24 (April 1, 2023 \u2013 March 31, 2024), the Assessment Year is 2024-25. This means you will file your Income Tax Return (ITR) in AY 2024-25, reporting income from FY 2023-24.So, in short the key difference between the 2 can be understood as:FY = When you earn the incomeAY = When you file taxes for that incomeWhy Does India Follow an April-March Financial Year?Unlike the calendar year (January-December) that most people follow in daily life, India\u2019s financial year runs from April to March.But, why?This system was inherited from British rule and has remained in place due to its convenience in tax planning.It aligns with Indis\u2019s agricultural harvest cycles, allowing farmers and businesses to close their accounts before the new sowing season. Since many rural economies depend on agriculture, this financial year structure helps synchronise taxation with income cycles.Many other countries follow different financial years:United States: October 1 \u2013 September 30United Kingdom: April 6 \u2013 April 5Australia: July 1 \u2013 June 30United Arab Emirates: January 1 \u2013 December 31Quick FY & AY Reference TableYou may find this table is useful when filling out ITR forms. When doing so, you need to always select the Assessment Year, not the Financial Year.Income Earned in (Financial Year)Corresponding Assessment Year (AY)April 2022 \u2013 March 2023AY 2023-2024April 2023 \u2013 March 2024AY 2024-2025April 2024 \u2013 March 2025AY 2025-2026Key Differences Between FY and AYHere are some key differences between a financial year and an assessment year:FactorsFinancial YearAssessment YearDefinitionThe period when you earn income.The period when you report and file taxes on the income earned in the previous FY.DurationApril 1st to March 31stApril 1st to March 31st (of the next year)ExampleFY 2023-24 (Income earned from April 2023 to March 2024)AY 2024-25 (Taxes files for FY 2023-24)RelevanceHelps track income for calculations.Used for tax filing and assessment by the Income Tax Department.Also Read: FY 2025-26 Investment Blueprint: How to Build a Future-Ready PortfolioWhy Does the ITR Form Ask for AY Instead of FY?A common question many taxpayers ask is:“Why does the ITR form require me to select the Assessment Year instead of the Financial Year?”Here\u2019s why:Since taxes are filed after the financial year ends, tax authorities assess income only in the following year.That\u2019s why all ITR forms always mention AY instead of FY\u2014you are reporting past income, not current earnings.Tip: Always add one year to your Financial Year to get your Assessment Year.Common Mistakes to Avoid While Filing ITREven seasoned taxpayers sometimes make errors when selecting FY and AY. Here\u2019s what to watch out for:Selecting the Wrong AY: Many people mistakenly enter their Financial Year instead of their Assessment Year. Always enter the AY when filing your ITR.Assuming FY and AY Are the Same: FY and AY can never be the same because income is earned first (FY) and assessed later (AY).Misreporting Income from Multiple Financial Years: If you have pending dues, arrears, or refunds from past years, be careful to report them under the correct FY to avoid tax notices.Tip: Keep track of your Form 16 (for salaried individuals) and bank statements to ensure correct reporting.By keeping these distinctions in mind, you can file your taxes accurately and avoid unnecessary errors. Always remember\u2014the Financial Year is when you earn, and the Assessment Year is when you file. The next time you’re filling out your ITR, double-check the AY to ensure a smooth and hassle-free tax filing experience!Share This:"}