Concepts · Glossary
FY vs AY (Financial Year vs Assessment Year)
FY is the year in which income is earned; AY is the next year, when tax is assessed.
In Indian tax terminology under Section 2 of the Income Tax Act, 1961:
- FY (Financial Year, "previous year" in the Act): The 12 months from 1 April to 31 March during which you earn income. Example: FY 2026-27 runs from 1 April 2026 to 31 March 2027.
- AY (Assessment Year, defined in Section 2(9)): The next financial year, during which the previous FY's income is assessed and tax filed. Example: FY 2026-27 corresponds to AY 2027-28.
ITR filing deadline (typically 31 July) falls 4 months into the AY. Advance tax instalments fall during the FY itself.
Worked example
Income earned on 15 March 2027 belongs to FY 2026-27. It is assessed in AY 2027-28. ITR-4 for that income is due 31 July 2027. Advance tax on it was due in 4 instalments during FY 2026-27 itself (15 Jun / 15 Sep / 15 Dec / 15 Mar 2027).
Practitioner tip
Always state the year explicitly when discussing tax with clients or CAs — "FY 25-26" vs "AY 25-26" refer to *different* years (one earlier than the other). The off-by-one is the single most common cause of wrong advance-tax deadlines.
Related Tool
Advance Tax Calculator →Related glossary terms
- ITR-4 (Sugam) — Income tax return form for individuals on presumptive taxation (44AD/44ADA/44AE).
- Section 87A Rebate — Income tax rebate that effectively zeros out tax for low-to-mid income earners.
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These definitions are educational. Tax laws change annually — verify with a Chartered Accountant before making GST or income-tax decisions.