Financial Year
The Financial Year (FY) in India runs from April 1 to March 31 and is the accounting period in which income is earned, investments are made, and transactions occur for the purpose of income tax computation under the Income Tax Act, 1961.
India's financial year begins on April 1 and ends on March 31, a schedule inherited from the British colonial era and distinct from the calendar year used in many other jurisdictions. All income tax computations, capital gains calculations, advance tax instalments, TDS deductions, and annual investment limits (like Section 80C's ₹1.5 lakh ceiling) reset on April 1 of each financial year.
For equity investors, the FY boundary is particularly significant for capital gains planning. Shares transferred on or after April 1 of a new FY fall into that year's computation, allowing the ₹1.25 lakh LTCG exemption to be applied afresh. Investors with substantial unrealised long-term gains sometimes time partial profit-booking across year-end boundaries to use two years' exemptions consecutively, though this must be weighed against transaction costs and STT.
The FY label in India uses the format 'FY YYYY-YY' — for instance, FY 2024-25 refers to the period April 1, 2024 to March 31, 2025. The corresponding Assessment Year is always one year ahead: AY 2025-26. Mixing up FY and AY labels when entering dates in ITR forms is a common clerical error that can trigger mismatches with pre-filled data in AIS.
Mutual fund houses, brokers, and depositories issue consolidated account statements (CAS) and capital gains reports on a financial year basis. These reports are critical inputs for ITR filing. Investors should download these reports for each FY promptly at year-end, as historical records may be harder to retrieve later and tax filing without accurate cost data leads to errors.
For salaried individuals, the FY also determines the employer's Form 16 issuance cycle. Form 16 (Part A and Part B) covers tax deducted and salary details for the FY and is typically issued by June 15 of the following AY. This document, along with broker capital gains statements and bank interest certificates, forms the complete documentation set required for accurate ITR preparation.