Assessment Year (AY)
The year following the financial year in which your income is assessed and taxed; income earned in FY 2025-26 is assessed in AY 2026-27.
The assessment year is the twelve-month period immediately after the financial year in which income is actually earned, and it's the year in which that income gets assessed, taxed, and reported to the tax department. Income earned between April 2025 and March 2026 (FY 2025-26) is reported and taxed in AY 2026-27.
The distinction trips up plenty of taxpayers filling out a return for the first time, since the return form itself is labeled by assessment year, not financial year. If you're filing a return for income earned in FY 2025-26, you're technically filing an 'AY 2026-27' return, even though every rupee of income in it was earned during FY 2025-26.
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.