What is the difference between Financial Year (FY) and Assessment Year (AY)?

In terms of income tax:
  • Financial Year (FY) is the year during which income is earned, on which you will pay tax in the Assessment Year.
  • Assessment Year (AY) is the year following the FY. You will have to evaluate the previous FY's income and pay taxes during the AY. 

For example,  Mr. Deepak's FY under consideration is from April 1st, 2016 to March 31st, 2017. 
The AY for income earned during this FY will begin after the year ends i.e., it will be from April 1st, 2017 to March 31st, 2018. Hence, it is FY 2016-2017 for which the AY is 2017-2018.

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