The assessment year in income tax is the 12-month period starting from April 1st and ending on March 31st of the following year, during which the income earned in the previous financial year is evaluated and taxes are filed. Essentially, the assessment year is when the government assesses and collects taxes on the income earned in the financial year before it. For example, income earned during the financial year 2023-24 will be assessed and taxed in the assessment year 2024-25. The assessment year is important because it is the year in which taxpayers file their Income Tax Returns (ITR) and settle their tax liabilities for the income earned in the preceding financial year.
Key Points:
- The financial year is the period in which income is earned (April 1 to March 31).
- The assessment year immediately follows the financial year.
- During the assessment year, income tax returns are filed, and tax liabilities are assessed and paid.
- Example: Income earned from April 1, 2023, to March 31, 2024 (FY 2023-24) is taxed in the assessment year April 1, 2024, to March 31, 2025 (AY 2024-25).
The assessment year thus aligns the tax administration process by providing a clear timeframe for evaluating and possibly collecting income tax for the income earned in the prior year.
