To be able to file their taxes, taxpayers need to know two crucial terms: the Annual Year and Financial Year. Read on to everything about them!
Many taxpayers mistakenly believe that the Financial Year (FY) is the same as the Annual Year. They frequently have a tendency to treat them similarly, which results in mistakes being made when filing their Income Tax Calculation returns.In this blog, we will discuss the Annual Year And Financial Year In Income Tax Calculation
What is the Financial Year?
The accounting year in which you receive income is known as a Financial Year (FY), which is the time period from 1 April to 31 March.
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What is the Annual Year?
The year that follows the fiscal year (FY) is the annual year (AY). The assessment and taxation of the income Tax earned during the FY takes place at this time. FY and AY both begin on April 1 and terminate on March 31. For instance, the assessment year for FY 2020–21 is AY 2021–22.
Annual returns on Form MGT-7 must be filed within 60 days of the Annual General Meeting (AGM). Form MGT 8 must be certified by a company secretary in practise for annual returns of listed companies and firms with a paid-up share capital of Rs 10 crores or more.
Important Differences Between AY & FY
The financial year is the calendar year or time frame during which income is generated. Tax returns are filed during the assessment year, which is the year that comes after the financial year which can be calculated using an income tax calculator.
Annual Year and Financial Year both have the ending and starting dates of March 31 and April 1, respectively. Therefore, the financial year is when businesses, salaried employees, and senior citizens make money, while the following year, or the accounting year, or AY, is when the income that has already been earned is assessed.
Income earned in the financial year, which comes before the AY, is subject to taxation and evaluation. Income Tax Return Forms are well recognized for using the term AY rather than FY, and this is the only explanation for this.
Income can never be taxed before it has been earned, even though it is always earned during the period known as the financial year. Therefore, money will only be evaluated for taxation after it has first been earned by an individual, and this is what happens during the assessment year.
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FY & AY for Recent Years
| Dates | Assessment Year | Financial Year |
| April 1st, 2021 – March 31st, 2022 | 2022 – 2023 | 2021 – 2022 |
| April 1st, 2020 – March 31st, 2021 | 2021 – 2022 | 2020 – 2021 |
| April 1st, 2019 – March 31st, 2020 | 2020 – 2021 | 2019 – 2020 |
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Important Information for Filing Tax Returns During the Year
When starting the process of filing their tax returns, taxpayers must keep in mind that AY and FY are two very distinct time periods.
- It’s crucial for taxpayers to understand that the term “AY” used on ITR forms does not mean “fiscal year” (FY).
- ITR forms for the financial year include Form 26AS, Form 16A, capital gains statement, and tax deducted at source, or TDS.
- All proofs that are submitted for review during the AY are referred to as FY.
- Taxpayers must always keep in mind that Income Tax Calculation will only be assessed after the fiscal year has ended.
Important Things to Keep in Mind When Filing Taxes During the FY
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Deductions can be Made Without Providing Receipts
The fact that deductions may be claimed in the FY without producing any receipts is one of the most significant details that typical taxpayers should be aware of.
Taxpayers must collect as much evidence of their expenses from witnesses for this purpose, and they must do so in writing, Keep thorough diary entries, diaries, or other written records in addition to the dates on which any services or things were acquired.
Keep video or photo records as well as the dates on which certain items were purchased.
Any physical evidence of an expense or action that can attest to the circumstances for which tax deductions are being requested will do.
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Maintain Organized Expense Accounts
Keeping meticulous records of expenses is a crucial tax tactic that taxpayers can use to reduce their tax obligations for the fiscal year (FY). It is possible for a taxpayer to overlook significant deductions if they are not organized and submitted on time, which could have a negative impact on his finances.
Taxpayers should be educated on the processes involved in filing taxes and how they operate.
Self-education is a useful tool for taxpayers to learn more about online and offline tax payment procedures.
There are accredited taxation courses available in nearby colleges and schools that may be pursued in this regard.
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Utilizing Tax Preparation Software for Easy Tax Filing
For simple tax filing in FY, tax preparation software can be downloaded from the internet.
This software is free, simple to use, and virus-free in every way.
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Deposit Income Ought to be Redistributed
Taxpayers who receive income from fixed or recurring deposits ought to strongly consider transferring this income to their children’s bank accounts if any.
In doing so, they will be able to significantly reduce their tax liability for a particular fiscal year.
In FY, it is strongly advised against filing joint returns.
Married couples might prefer to submit individual tax returns. This is due to the fact that those who file tax returns jointly are unlikely to save much money as a result, and the entire process of filing a joint return may turn out to have been ineffective.
What to Keep in Mind When Filing Tax Returns for Annual Year And Financial Year
Taxpayers must make a point of being as open as possible when filing tax returns during the current fiscal year (AY).
This includes being open about their prior tax payments, the different tax forms they used, and the receipts they obtained from the Income Tax Calculation department after filing their returns online.
The tax returns that must always be filed online are those that are filed during the AY.
It would be a good idea for every taxpayer to use the online income tax calculator when filing tax returns during AY.
Conclusion
If taxpayers correctly understand what the two periods of Annual Year and Financial Year mean, the entire process of filing taxes in the FY and claiming returns in the AY can be completed in a very efficient manner.
The FY always comes before the AY, and evaluations are always completed in the latter period after income has been accrued in the former.
If you are a working professional, submitting income tax returns can sometimes be a bothering task. To solve this problem, you can get assistance from Vakilsearch. Their expert team of legal professionals will make this procedure easy and hassle-free for you.
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