If you are not aware of what is assessment year in income tax is, this article is for you. Read on to know what the assessment year and previous year is in terms of filing Income tax.
Income tax is a compulsory payment to the government by people who earn income. It includes taxes on income from any source such as salary, business, capital gains, etc. Know about Previous Year and Assessment Year in Income Tax!
The amount of tax paid depends upon the amount of income earned and also on how much it was taxed earlier. Taxpayers get an annual statement from the Income Tax Department which shows their total taxable income for that year along with all deductions made in calculating their taxable income.
Assessment Year and Previous Year are two very important terms when it comes to filing and understanding income tax.
Filing Income Tax Returns
Income tax is a tax levied by the government on income. This includes profits from employment, pensions, investments, and interest on savings. It is based on the principle that all people should pay taxes according to their ability to pay. The amount of income tax you have to pay depends upon your taxable income (the money you earn in a year).
It is governed by the Income Tax Act, of 1961. The act covers all persons who are residents of India for any part of the year. The income Tax an individual pays depends on the annual income of that individual. Along with that, there are several tax exemptions that a person can avail of.
The Income Tax Act of 1961 allows multiple types of tax exemption benefits for people based on their eligibility for each. For filing income tax returns it is important to know What is Assessment Income Tax.
If you want help with filing income tax returns Vakilsearch is here to help you. We have a team of experts. We will guide you through all the legal procedures and steps of filing income tax returns. It is very important to stay aware of all the rules and regulations while filing an income tax return. Vakilsearch will help you with that and solve all your queries.
Previous Year and Assessment Year in Income Tax:-
The financial year (FY) runs from April 1st to March 31st of the following year. This period is crucial for calculating an individual’s annual income for tax purposes. To differentiate this period from the one in which the tax is assessed and paid, we have the concept of Previous Year and Assessment Year.
Previous Year:
- The previous year refers to the financial year immediately preceding the current year.
- For example, if you are filing your income tax return for FY 2023-24, the previous year would be FY 2022-23.
- This means your income earned in FY 2022-23 will be taxed in FY 2023-24.
Assessment Year (AY):
- The assessment year is the year in which the tax on income earned in the previous year is assessed and paid.
- It starts one year after the previous year and ends on March 31st of the subsequent year.
- Continuing the example, if the previous year is FY 2022-23, the corresponding assessment year would be AY 2024-25.
Understanding the Sequence:
- You earn income during the financial year (FY).
- In the following FY, you file your income tax return based on the income earned in the previous FY.
- The tax assessed on this income is paid in the assessment year (AY) following the FY in which you filed your return.
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In this, a person analyzes the entire income and the information they provide and make sure that it is up-to-date and accurate. If you need help with filing income tax returns and assessment of the information you can reach out to legal experts at Vakilsearch. You can also take help in Income Tax Return assessments and they will guide you through the entire procedure step by step.
Importance of Assessment Year in ITR:-
The income tax assessment year is the financial year in which an income tax return has to be filed. The assessment year is decided by the Income Tax Department based on your previous years’ income and other relevant factors. The assessment year for an individual starts on the 1st of April of a particular financial year and ends on the 31st of March of the next financial year.
Assessment year allows the taxpayers as well as the income tax department to assess the previous year’s income and ensure its accuracy. This is helpful while filing the income tax return. The assessment year starts on April 1 and ends on 31st March.
To put it in simpler words, the year in which the income is earned is the previous year whereas the year in which that Income is assessed for income tax filing purposes is the assessment year.
Conclusion:-
Income tax returns are filed every year by people who earn a certain amount of income. This Tax amount is used by the government to fund public schemes and for the development of the nation.
For filing income tax returns you must be aware of the terms and the step-by-step process. Assessment year and previous year are two important terms for filing income tax returns. Assessment year is the year in which the annual income of an individual is assessed for income tax filing in process. The previous year is the year in which the income is earned. The previous year precedes the assessment year.
If you want help with filing income tax returns or income tax assessments, you can contact Vakilsearch. Our experienced team of legal experts will guide you through the entire process and help you with all legal compliances.
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