Date wise, both Assessment Year (AY) and Financial Year (FY) is a period of twelve months starting from April 1st and ending on March 31st. The activity done and refer to in these twelve months helps to refer to them as Financial Year (FY) or Assessment Year (AY). If you are still unable to understand what is assessment year, then, Assessment Year definition says the year in which the assessment and filing of the assessee income is done whereas Financial Year (FY) indicates the year in which the financial information of the assessee gets reported to the government.

Hie Kruthika, Assessment Year ----------------------- - Assessment Year (AY) is defined in section 2 (9) of Income Tax Act, 1961 as a year in which income of an assessee of the previous year/last year needed to be assessed. It is called as “tax year” in some of the countries. Assessment Year (AY) is a period of twelve months starting from April 1st and ending on March 31st. - Date wise, both Assessment Year (AY) and Financial Year (FY) is a period of twelve months starting from April 1st and ending on March 31st. The activity done and refer to in these twelve months helps to refer to them as Financial Year (FY) or Assessment Year (AY). - If you are still unable to understand what is assessment year, then, Assessment Year definition says the year in which the assessment and filing of the assessee income is done whereas Financial Year (FY) indicates the year in which the financial information of the assessee gets reported to the government. Previous Year --------------------- - Previous Year (PY) as per section 3 of Income Tax Act, 1961 is said to be a year in which income is earned to be taxed exactly in the immediately next/following assessment year. It is also known as “income year” in some of the countries. - For Example – The income accrued in FY 2013-2014 its Assessment Year (AY) is 2014-2015. So, Financial Year (FY) is the Previous Year (PY) while Assessment Year (AY) is the Current Year (CY) in which the income is being assessed earned in Previous Year (PY). In the Assessment Year (AY) your total tax liability for the income earned in the previous financial year is evaluated and computed. Therefore, tax for the income earned in the Previous Year (PY) is paid in the Current Year (CY).

In simple terms, assessment year means the current year and previous year means the last or financial year. For example, if you are filing your tax now, year 2007-08 will be considered as previous year and 2008-09 will be considered as assessment year.