- How to Choose the Correct AY When Filing Returns
- Frequently Asked Questions
- What is the Financial Year (FY)?
- What is the Assessment Year (AY)?
- Key Differences Between Financial Year and Assessment Year
- Real-Life Scenarios Explained
- How to Choose the Correct AY When Filing Returns
- Frequently Asked Questions
- Earns income from April 1, 2025, to March 31, 2026 (FY 2025-26)
- Files tax return between April 1, 2026, and July 31, 2026 (or as extended) under AY 2026-27
- Pays additional tax or claims refunds during AY 2026-27
Example 2: Self-Employed Freelancer
- Earns income in FY 2025-26
- Files return in AY 2026-27 based on actual income and expenses
- Makes advance tax payments during FY 2025-26 if applicable
Example 3: Business Owner
- Business income earned in FY 2025-26
- Files returns and audit reports by October 31 in AY 2026-27
- Pays taxes after reconciliation and claims benefits like depreciation
How to Choose the Correct AY When Filing Returns
Always pick the Assessment Year that follows your income year. Earned money in FY 2025-26? Choose AY 2026-27 on your tax return form. This prevents errors in TDS matching and refund processing.
Double-check the year before submitting your return. Wrong year selection causes processing delays and notice from tax department.
Frequently Asked Questions
What is the difference between FY and AY in simple terms?
Financial Year (FY) is when you earn income, while Assessment Year (AY) is when you file taxes on that income. FY comes first, and AY follows immediately after. For income earned in FY 2025-26, you file returns in AY 2026-27.
Which financial year are we in right now in India?
As of December 2025, we are in Financial Year 2025-26, which started on April 1, 2025, and will end on March 31, 2026. The corresponding Assessment Year will be AY 2026-27.
Can I file returns for FY 2025-26 during the same year?
No, you cannot file returns during the same Financial Year. You must wait until the Assessment Year begins. For FY 2025-26 income, filing opens on April 1, 2026 (start of AY 2026-27).
What happens if I select the wrong AY while filing ITR?
Selecting the wrong Assessment Year can cause your return to be rejected or create processing delays. Your TDS credits may not match, and refunds could get stuck. Always verify the AY matches your income year before submission.
Do I pay advance tax in FY or AY?
You pay advance tax during the Financial Year when you’re earning the income. If your tax liability exceeds â‚ą10,000 in FY 2025-26, you must pay advance tax in quarterly installments during that same year.
Why does India's financial year start in April?
India’s FY starts in April due to historical agricultural cycles and administrative convenience. This timing aligns with the harvest season and allows better budget planning by the government.
Is assessment year the same as previous year?
No, the previous year refers to the Financial Year when income was earned. Assessment Year is the following year when that income gets assessed. For tax purposes, “previous year” and “Financial Year” mean the same thing.
When is the last date to file ITR for AY 2026-27?
October 31, 2026. However, the government may extend these dates, so check official notifications.
Can FY and AY be the same for any transaction?
No, FY and AY cannot overlap for tax filing purposes. They are consecutive 12-month periods. However, advance tax paid in FY gets adjusted against the final tax liability calculated in AY.
How do I remember which year to use while filing taxes?
Simple rule: Add 1 to your income year. Income in FY 2025-26 means file in AY 2026-27. The Assessment Year is always one year ahead of the Financial Year.
