In Income-tax Act, 1961 is “Assessment Year” defined in Section 2(9) as: “Assessment Year” means the period of twelve months commencing on the 1st day of April every year. It has to be equal to 12 months. | Definition, Theories, Pros and Cons, “The purpose of Ask Any Difference is to help people know the difference between the two terms of interest. It is equal to 12 months if the sources of income were active throughout the year and less than 12 months if the sources were set up late or ended up before the financial year ended. Meaning of f Assessment Year Assessment Year . The previous year is either less than 12 or equal to 12 months while the assessment year is always a complete period of 12 months. Assessment year is the year followed by the financial year in which the evaluation of the previous year’s income is done, tax is paid on the same and ITR is filed. Can the Previous Year be less than 12 months? Assessment Year is the year in which one file income tax returns of the year prior to it (i.e. Issue/Justification. Normally, the previous year is a period of 12 months, but it can be shorter than that. Previous Year is the year concerning the income on which tax is levied. Financial Year). 2016-17, then the assessment year will be 2017-18. Financial Year is the actual year starting with 1st of April and ending on 31st of March for which you’re filing your return and the Assessment Year will always be the “succeeding year”. Assessment Year is what is used in Income Tax Utilities, ITR and Challan 280. Previous year [Section 3] :– It means the financial year immediately preceding the assessment year. The year in which income tax liability for the previous year arises. Shipping business of a non-resident. This function returns all dates from the previous year given the latest date in the input parameter. Income for previous tax year, no assessment year given. AY is the year in which income tax returns are filed for income that was earned in the previous Financial Year that ended. On the other hand, Assessment Year refers to the period of twelve months, starting on the 1st of April. Similar Posts. 4. This means a period of 12 months commencing on 1st April every year. BEd 2nd year Assessment for learning Previous Year Question paper in hindi and english. The difference between Previous Year and Assessment Year is that while Previous Year is the year when the actual transactions happened or the period to which our data of Income sources belong, Assessment Year is the following (for tax revenue collection) or any other year in which the data is processed. This year is important in terms of the collection of data regarding income and their sources. As far as Financial Accounting is concerned, the time period is the Financial year (1st April of a year to 31st March of the next year) and not the usual year. Assessment of taxes requires 12 months time as different stage are undertaken in specific periods while Previous year can be shorter if the sources of Income were active partially during the financial year. As per section 2(34) and 3, previous year means the financial year immediately preceding the assessment year. Difference Between Life Assurance and Fire Insurance (With Table), What is Microeconomics? Assessment year is the evaluation year of the financial year. This is […] Previous Year (PY) You should be able to infer this yourself. This means a period of 12 months commencing on 1 st April every year. It is a full financial year (that is, 12 months). The year is important to analyze data and calculate Income Tax. For Financial Year 2014-15 the Assessment Year will be 2015-16. Income […] This means a period of 12 months commencing on 1 st April every year. What does Previous Year mean? AOP or BOI or AJP formed for a particular event or purpose. Accordingly Previous Year in the case of a continuing business shall be the Financial Year immediately preceding the relevant Assessment Year, whereas Previous Year in the cases of newly set up business or for new source of income shall be the period commencing from the date of new business set up or source of income coming into existence to the forthcoming 31st March of that Financial Year immediately preceding the relevant Assessment Year. ): As per the ITA, a Previous Year is the financial year immediately preceding the assessment year. The year in which income is earned in the previous year and such income is taxable in the immediately following year which is the assessment year. The previous year is the year for which the data of activity and income is collected and compiled whereas the assessment year is the year in which Income Tax is calculated and collected. A financial year has a double role to play: it is a previous year as well as an assessment year. It is the year in which the income that one has earned in the financial year that is just ended is evaluated. Not all the Company Information is available. AY is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it. And they are: 1. The definition of the assessment year is given in Section 2(9) of the Income Tax Act, 1961. Yeah you are right – this is the year for which your income is being assessed in the Assessment Year. We pay the Income-tax in the year succeeding the year in which we earned. As per present tax laws, Assessment Year means the period 12 months commencing on the first day of April. The year in which income is earned is known as Previous Year (PY) and the next year in which income is assessed is known as Assessment Year (AY). Related Posts. Assessment Year [Sec. As such for the assessment year 2018-2019, the Previous Year for continuing business is 2017-2018 i.e. As a general rule, the income earned in the previous year is taxed only in the assessment year but in the following cases, the income earned is taxed in the same year in which it is earned or received. Income earned in the previous year 2019-20 is taxable in the assessment year 2020-21. The assessment year is the year that follows the financial year and it is the period in which tax returns are filed. Previous Year is important to collect data regarding the sources of Income and their activity while the Assessment year is important for the assessment of Income Tax revenue by the Government. Assessment year [Section 2(9)] The term has been defined under section 2(9). All taxpayers are required to follow a uniform Previous Year. The activity is assessed in entire period. Check Also: [1000+] B.Ed Lesson Plans; The word previous is a big give away. - 2 (9)] Meaning and Definition Assessment year refers to a year in which financial year is assessed. 2. The year in which income is earned is the previous year and such income is taxable in the immediately following year which is the assessment year. Person Leaving India. For instance, if your financial year is from 1 … For Assessment Year 2018-2019 the Previous Year should be the Financial Year ending 31st March 2018. Definition:- Assessment year may … (b) Newly set up business or profession. Based on the definition, for AY 2018-19, the previous year will be starting from 1st April 2017 to 31st March 2018 i.e FY 2017-18. The last year of their lives/marriage etc. What does Assessment Year mean? As such for the assessment year 2018-2019, the Previous Year for continuing business is 2017-2018 i.e. The previous year is the year which becomes the source of Income activities and the year for which data is collected whereas Assessment year is the year in which the outputs of the previous year are subjected to taxes levied by the government. As such for the assessment year 2014-15, the previous year for a continuing business is 2013-14 i.e. But this rule has certain exemption. When we talk about paying or collecting taxes in the current year, the current year itself is the Assessment Year. Ok, we discuss these, one by one. As such for the assessment year 2014-15, the previous year for a continuing business is 2013-14 i.e. This means a period of 12 months commencing on 1st April every year. For instance, income of previous year 2020-21 is assessed during 2021-22. The previous year is the year which becomes the source of Income activities and the year for which data is collected whereas Assessment year is the year in which the outputs of the previous year are subjected to taxes levied by the government. The year in which income is earned is the previous year and such income is taxable in the immediately following year which is the assessment year. The actual transactions and data collection take place in the previous year while the calculation and collection of taxes by the Government happens in the Assessment Year. A short form of this is PY which stands for Previous Year. The definition of the assessment year is given in Section 2(9) of the Income Tax Act, 1961. Therefore, 2021-22 is the assessment year for assessment of income of the previous year 2020-21. Assessment Year is the financial year, in which the income of the assessee earned during the previous year is evaluated and taxed. Common FAQs on Assessment Year(AY) & Financial Year(FY) When it comes to income tax people are often heard talking about income tax return filing, income tax notices, the refund status, deductions, tax benefits and much more. Previous Year can be understood as the financial year in which the assessee makes money. While the past year always means (roughly) the 12 months up until now, the last year can be used in constructions such as:. Assessment year is the year followed by the financial year in which the evaluation of the previous year’s income is done, tax is paid on the same and ITR is filed. 1-4-2017 to 31-3-2018. Person is likely to transfer, sell or dispose of assets to avoid the payment of taxes. This is the assessment year. All these processes are undertaken in the year, succeeding the year for which the taxes are collected. (a) Previous year in case of a continuing business. That means it’s the period from 1 st April to 31 st March. It is exactly 12 month period because the processes of calculation, collection and assessment are spread over different periods of the year. AY 2009-10 and prev year is 2008-09 In both cases their income sources aren’t active the entire 12 month period, therefore, their income would be considered only for the months they were active. It is the financial year preceding the assessment year. It is the financial year, in which the income earned in the previous year is taxable. Previous Year is the financial year, in which the assessee earns income. In simple terms, assessment year means the current year and previous year means the last or financial year. For example – if you have earned an income between 1st, April 2016 to 31st, March 2017, then 2016-2017 will be referred to as Financial Year and Assessment Year would be between 1st, April 2017 to 31, March 2018. Belated returns FY AY 2012-13,2013-14,2014-15, … Difference Between Previous Year and Assessment Year (With Table), https://help.myitreturn.com/hc/en-us/articles/219720747-What-is-an-Assessment-Year-, https://tax2win.in/tax-glossary/previous-year, Comparison Table Between Previous Year and Assessment Year (in Tabular Form), Main Differences Between Previous Year and Assessment Year, Difference Between Except and Besides (With Table), Difference Between McAfee LiveSafe and Total Protection (With Table), Difference Between HCPCS and CPT (With Table), Difference Between Catholic and Lutheran (With Table), Difference Between Articles of Confederation and Constitution (With Table), Difference Between Verbal and Non-Verbal Communication (With Table). Hie Kruthika, Assessment Year ----- - Assessment Year (AY) is defined in section 2 (9) of Income Tax Act, 1961 as a year in which income of an assessee of the previous year/last year needed to be assessed. When talking about the present, the financial year preceding the current financial year is usually the Previous Year and the current year itself is the Assessment Year. `Previous Year’ is the financial year immediately preceding the assessment year. You will understand the difference clearly through the following example. On the other hand, Assessment Year refers to the period of twelve months, starting on the 1st of April. The previous year is either less than or equal to 12 months while the assessment year is always 12 months long. 12 months if the activity continues the whole year and less if either the activity started late or ended up early. Period starting from April 1 and ending on March 31 of the next year. (a) Previous year in case of a continuing business. As against, Assessment Year is the year in which income relating to the previous year is assessed for the purpose of taxation. 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