19 October 2010
Financial Year (FY), Assessment Year (AY) and Previous Year (PY) are terms very commonly heard during the Income Tax (IT) returns filing season.
Financial Year (FY)
The financial information is reported on a yearly basis, and the year for which this information is reported is called a Financial Year, or FY in short.
The actual start and end of a financial year varies from country to country.
For example, the financial year in India starts on 1st April every year, and ends on 31st March of the following year. Thus, the last financial year in India (for which companies would soon start reporting their incomes) started on 1st April 2007, and ended on 31st March 2008. This is usually denoted as FY 07-08, or FY 08.
In USA, the financial year coincides with the Calendar Year (January to December). Thus, it starts on 1st January every year, and ends on 31st December of the same year. The current financial year in USA started on 1st January 2008, and would end on 31st December 2008. This is usually denoted as FY 08.
The term Financial Year, or FY, is used universally. That is, it is used not just in the context of income tax, but also for all other accounting and reporting.
Assessment Year (AY)
Income from a particular financial year is assessed for income tax in the following year. The financial year in which this assessment takes place is called the Assessment Year (AY).
Thus, for the current tax season, we would be filing the income tax returns for the Financial Year 07-08 (or FY 07-08), and since it would be assessed in the year 2008-2009, the Assessment Year is 08-09 (or, AY 08-09).
The term "Assessment Year" is normally used specifically for Income Tax (IT).
Previous Year (PY)
Now after reading about FY and AY, this should be simple!
In an assessment year, the income from the year preceding it is assessed for income tax. This year is called the Previous Year, or PY in short. So, simply speaking, Previous Year is the financial year for which your income is being assessed. Now that's simple, isn't it?
Let's continue with our example: For the current tax season, we would be filing the income tax returns for the Financial Year 07-08 (or FY 07-08), and therefore, it is also the Previous Year (PY 07-08). Since this income would be assessed in the year 2008-2009, the Assessment Year is 08-09 (or, AY 08-09).
Again, the term "Previous Year" is also normally used specifically for Income Tax (IT).
19 October 2010
In Income Tax Act 1961 context the FY is a period of twelve months starting from 1st day of April and ends with 31st March. The AY is more is period of twelve months immediately stating from the end of FY. For example for the current FY 2010-11 the AY will be 2011-12.
20 October 2010
Tax on Income of a Financial year is assessed by the income tax authorities in the next year called d Assessment year. under I.T. Act each F.y. has an A.Y. e.g. For f.y. 2009-10 A.y. is 2010-11 & for f.y. 2010-11 a.y. = 2011-12
CAclubindia
