Assessment Year (AY)
Definition
The 12-month period in which income earned during the previous Financial Year (FY) is evaluated, assessed, and taxed by the Income Tax Department.
Key Takeaways
- The period (1 April to 31 March) in which tax returns are filed and reviewed.
- Always corresponds to the year immediately following the Financial Year (FY) in which income was earned.
- AY 2026-27 assesses income earned during FY 2025-26.
- Choosing the incorrect AY on ITR forms leads to automatic rejection and notices.
Detailed Explanation
In Indian tax compliance, the Assessment Year (AY) is the 12-month period starting on 1 April and ending on 31 March of the following year during which the income earned in the immediately preceding Financial Year (FY) is evaluated and taxed. For example, the money you earn between 1 April 2025 and 31 March 2026 falls under Financial Year (FY) 2025-26. The tax return for this income must be filed and assessed in the subsequent Assessment Year (AY) 2026-27, which runs from 1 April 2026 to 31 March 2027. Understanding this distinction is critical because the ITR forms and tax slabs are defined by the Assessment Year.