Assessment Year

The Assessment Year (AY) is the twelve-month period, running 1 April to 31 March, in which the income you earned during the preceding financial year is assessed, declared in your income tax return and taxed. It always falls one year after the income actually arises. So income earned in Financial Year (FY) 2025-26 (1 April 2025 to 31 March 2026) is assessed in Assessment Year 2026-27 — the year in which that return is filed and the tax finalised.

Legal basis

Assessment Year is defined in Section 2(9) of the Income-tax Act, 1961 as the period of twelve months commencing on the 1st day of April every year. The year in which the income is actually earned is the "previous year" (Section 3), and the return for a given AY is filed with the Income Tax Department under Section 139.

Assessment Year vs Financial Year

• Financial / Previous Year: the year income is earned, e.g. FY 2025-26.
• Assessment Year: the following year when that income is assessed and taxed, e.g. AY 2026-27.
• The slabs and rules of the relevant Finance Act apply to the income of the previous year, not to the AY itself.

Update: "Tax Year" from 2026-27

The new Income-tax Act, 2025, effective 1 April 2026, discontinues both "previous year" and "assessment year" in favour of a single "Tax Year" that coincides with the financial year. AY 2026-27 (covering income up to FY 2025-26, still governed by the 1961 Act) is the final cycle to use this term; from FY 2026-27 onwards, filings refer simply to Tax Year 2026-27.