Assessment Year
The Assessment Year (AY) is the 12-month period from April 1 to March 31 during which income earned in the preceding Financial Year is assessed and taxed; for example, income earned in FY 2024-25 (April 2024 to March 2025) is assessed in AY 2025-26.
The distinction between Financial Year and Assessment Year is foundational to Indian income tax compliance and is a frequent source of confusion for first-time ITR filers. The Financial Year is the period in which income is earned and transactions occur. The Assessment Year immediately follows and is the period during which the taxpayer files an ITR, and the income tax department processes and assesses the return.
All ITR forms are labelled with the Assessment Year — filing a return for income earned between April 1, 2024 and March 31, 2025 means filing under AY 2025-26. Tax authorities, intimations, notices, demand orders, and refunds all reference the AY. Keeping track of which AY corresponds to which financial year is essential for maintaining correct records and responding accurately to any income tax correspondence.
The due date for filing ITR for most individual taxpayers (non-audit cases) is July 31 of the Assessment Year. For taxpayers whose accounts require audit under Section 44AB (typically business or professional income above certain thresholds), the due date is October 31 of the AY. Belated returns can be filed up to December 31 of the AY under Section 139(4), but with late filing fees under Section 234F (₹1,000 for income up to ₹5 lakh; ₹5,000 otherwise).
Capital gains from equity transactions — which are reported in Schedule CG of ITR-2 — are always assessed in the AY following the FY in which the transactions occurred. If an investor transferred shares in March 2025, the resulting capital gain forms part of FY 2024-25 income and is assessed in AY 2025-26. The AIS and Form 26AS for AY 2025-26 will reflect these transactions as reported by the broker/stock exchange.
Familiarising oneself with the AY concept also matters when accessing old tax records, replying to income tax notices, or filing revised returns. A revised return under Section 139(5) can be filed before the end of the AY (i.e., before March 31 of the AY) to correct any mistakes in the original return. Missing this window means corrections can only be done through a rectification application under Section 154.