As a person we earn income in one financial year and it gets taxed in the next financial year. FY is the year in which income is earned and the year in which income is taxed is known as Assessment Year. Further, the rate of tax applicable will be the rate of assessment year.
Meaning of Financial Year (FY) – Financial year is the year in which you earn income. A Financial year starts from 1st April and ends at 31st March.
Meaning of Assessment Year (AY) – Assessment Year means the period of 12 months commencing from 1st April every year. AY is the year in which returns are filed for the income earned in the previous financial year ended.
Hence, income is earned in Financial year (FY) and such income is taxed in Assessment year (AY).
|Period||Financial Year (FY)||Assessment Year (AY)|
|1st April 2016- 31st March 2017||2016-17||2017-18|
|1st April 2017- 31st March 2018||2017-18||2018-19|
|1st April 2018- 31st March 2019||2018-19||2019-20|
Hindi Meaning of Financial Year and Assessment Year?
Hindi meaning Financial year (FY) is वित्तीय वर्ष and Hindi meaning of assessment year (AY) is निर्धारण वर्ष.
Let us understand with an Illustration:
Mr. Albert is working in a software company and getting a salary of Rs. 50,000 per month for financial year 2017-18.
The income of Mr. Albert is Rs. 6,00,000 which is earned by him in the year 2017-18 which is known as Financial Year and it will be taxable in the year 2018-19 which is known