What is assessment year or previous in Income tax?

ASSESSMENT YEAR

Assessment year means the period of twelve months commencing on the first of April every year and ending on 31^st March of the next year. An assessee is liable to pay tax on the income of the previous year during the following financial year (assessment year).

PREVIOUS YEAR

The year in which income is earned is known as previous year and the next year in which this income is taxable is known as assessment year. Income tax is charged on the total Income of the previous year at the rates prescribed by the relevant Finance Act for the assessment year:

1. Generally, previous year means the financial year immediately preceding the Assessment Year. Financial Year begins on 1^st April and ends on 31^st March.

2. The financial year (year ending on 31^st March) will be the uniform previous year for all the assesses and for all sources of Income.

3. In the case of a newly set-up business or profession or any other new source of income during the financial year, the previous year will begin from the date of setting up of the new business or profession or from the date of coming into existence of the new source of income and will end with the said financial year. In the case, the first previous year may be of less than 12 months.

In other words, a financial year is both a previous year as well as an assessment year. It is previous year for the income earned during that financial year and assessment year for the income earned during the preceding financial year, e.g., Financial Year 2018-19 is previous year for current income and is assessment year for the income earned during the Financial Year 2017-18.

NOTE: There is no compulsion on any assessee to close his account on 31^st March only. If for any reasons, personal, religious or any other ground an assessee wants to continue to close his accounts on a date different from 31^st March, he can do so. However, he would be required to make up his accounts on 31^st March also, for the purpose of submitting the Income tax Return.

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