Indian financial year

Indian Financial year

Financial year and assessment year

A Financial Year (FY) is the period between 1 April and 31 March – the accounting year in which you earn an income. A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. The purpose of having a financial year is to enable businesses and organizations to track their financial performance over a specific period, make financial projections, and prepare financial statements such as balance sheets and income statements. A financial year is 12 months used for accounting and financial reporting purposes. It is also known as a fiscal year, and it can be different from the calendar year. In countries, like Australia and India, the financial year starts on July 1st and ends on June 30th of the following year. refers to government finances, particularly related to revenue generation and expenditure management. It relates to the financial policies, practices, and procedures of the government to manage its resources and achieve its economic and social objectives It is also used for financial reporting by businesses and other organizations. Laws in many jurisdictions require company financial reports to be prepared and published on an annual basis but generally not the reporting period to align with the calendar year (1 January to 31 December). Taxation laws generally require accounting records to be maintained and taxes calculated on an annual basis, which usually corresponds to the fiscal year used for government purposes.  The Financial Year is from the 1st of April 2021 to the 31st of March 2022, then its term will be known as FY 2021-22.

  • The income you earned from 1st April 2021 to 31st March 2022 is the income earned in the current Financial Year (FY) 2021-22. Also,
  • Any income earned by you for the period starting from 1st April 2021 to 31st March 2022 can be simply stated as income earned in Financial Year (FY) 2021-22


The Assessment Year for the income earned during this period will start after the end of the financial year, that is, the 1st of April 2022 to the 31st of March 2023. The assessment year (AY) is the year that comes after the FY. This is the time in which the income earned during FY is assessed and taxed. Both FY and AY start on 1 April and end on 31 March. For instance, for FY 2020-21, the assessment year is AY 2021-22.

  • Income earned in the current Financial Year 2020-21 (i.e. from 1st April 2020 to 31st March 2021) will become taxable in Assessment Year 2021-22 (i.e. from 1st April 2021 to 31st March 2022).
  • Income earned in Financial Year 2019-20 (i.e. from 1st April 2019 to 31st March 2020) will become taxable in Assessment Year 2020-21 (i.e. from 1st April 2020 to 31st March 2021).

Difference between financial year and assessment year


Financial year and Assessment year are two very different and crucial terms that taxpayers need to be familiar with. No communication will be made correctly if the assessment year or financial year has been wrongly referred to. Financial Year and Assessment Year have been ages-old terms in Income Tax. Still, many taxpayers get confused between these two terms. Many assess/taxpayers tend to presume both terms as one and the same thing & this leads to several problems while filing income tax returns. To help file the income tax return in a smooth & hassle-free manner, we will explain and solve all the queries of our readers related to the assessment year and financial year. From the tax perspective, a financial year is a year in which a person earns an income. The 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.

For instance, if we consider the financial year starting from 1 April 2020 to 31 March 2021, then it is known to be the financial year 2020-21. The assessment year begins after the financial year ends, so the assessment year of FY 2020-21 would be AY 2021-22.

How do you calculate the financial year?

The financial year is usually determined by the organization's accounting policies or by the government regulations in the country where the organization is located. The financial year can be different from the calendar year, depending on the organization's needs and objectives.,if your financial year is from 1 April 2020 to 31 March 2021, then it is known as FY 2020-21. The assessment year for the money earned during this period would begin after the financial year ends – that is from 1 April 2021 to 31 March 2022. Hence, the assessment year would be AY 2022-22. 
The start date of the financial year can be any date, but it should be consistent with the organization's accounting policies. For example, if the organization's accounting policies state that the financial year starts on July 1st, then the start date will be July 1st. The end date of the financial year is usually 12 months after the start date. For example, if the start date is July 1st, then the end date will be June 30th of the following year. Once determined the start and end dates, verify that they are consistent with the organization's accounting policies or government regulations. If necessary, adjust the dates to ensure compliance.

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