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Difference between financial year and assessment year

Difference Between Financial year and Assessment year

Difference Between Financial year and Assessment year

The phrases “financial year” and “assessment year” are two extremely important terms that all taxpayers should be familiar with to file their taxes and tax returns in a smooth and hassle-free manner.

Nowadays, tax filing is a simple process that can be completed online from the convenience of one’s own home or office. The procedure of submitting taxes or tax returns is also not particularly time-consuming and can be completed in about an hour.

We provided our clients with high-quality tax filing services that they could use at any time during the year. We also take it upon ourselves to explain key terminology to our customers, such as assessment and financial year, so that they are never in the dark about how the tax filing process works.

Important differences between Financial year and Assessment year

The year or period in which money is earned is referred to as the financial year. The assessment year follows the financial year, and it is at this time that tax returns are filed.

The financial year (FY) and the assessment year (AY) both end on March 31st and begin on April 1st. The Financial Year is thus the year in which businesspeople, salaried professionals, and senior citizens earn money, whereas the next year, AY, is the time when previously earned revenue is appraised.

Taxation and evaluation are done for income earned in the year before the AY, which is the financial year. Income Tax Return Forms are known to utilize the term AY instead of FY for this reason alone.

While income is always earned during a financial year, it can never be taxed before it is earned. As a result, money is only appraised for taxation purposes once it has been earned by an individual, and this occurs during the assessment year.

Dates Assessment Year Financial Year
April 1st, 2015- March 31st, 2016 2016-2017 2015-2016
April 1st, 2014- March 31st, 2015 2015-2016 2014-2015
April 1st, 2013- March 31st, 2014 2014-2015 2013-2014

Crucial Things to Remember When Filing Taxes During FY

Receipts are not required to claim deductions.

Regular taxpayers should be aware that deductions can be claimed in the FY without the need to present receipts. Taxpayers must collect as much documented information as possible from people who can vouch for their expenses, keep video or photo records, as well as the dates on which specific items were purchased, and keep detailed journal entries, diaries, or other forms of written records, as well as the dates on which any services or items were purchased.

Any physical proof of an expense or action will suffice if it can prove scenarios for which tax deductions are sought.

Expense accounts must be kept systematically.

Keeping structured records of expenses is an important tax tactic that taxpayers can use to save money on tax payments during the fiscal year or FY. If receipts are not organized properly and promptly, a taxpayer can overlook significant deductions that could be extremely costly to him financially.

Taxpayers should learn about the procedures for filing taxes and how they work.

Self-education is an efficient technique for taxpayers to learn more about tax payment procedures online and elsewhere. There are accredited taxation courses available in local universities and schools that can be pursued in this regard.

Tax Preparation Software can be used for suitable tax filing

  • For a seamless submission of taxes in FY, tax preparation software can be obtained from the internet.
  • This software is both free and simple to use, as well as virus-free.
  • Taxpayers can take advantage of the IRS’s Free File Program to make their tax payments on time and without spending any money.

The IRS Toll-Free Numbers should not be used.

  • When filing tax returns in a given fiscal year, it’s a good idea to avoid using IRS Toll-Free services.
  • Such services aren’t always reliable, and the results may change for various taxpayers.
  • Because of the misinformation provided by IRS service representatives, taxpayers may be forced to file more taxes with interest at a later date.

Income from deposits should be shifted

Taxpayers who get income from fixed or recurring deposits should seriously consider transferring it to their children’s bank accounts if they have any. They will be able to save a significant amount of money in taxes for a certain fiscal year by doing so.

Filing Joint Returns should be strictly avoided in FY

Married couples might think about filing separate tax returns. This is because those who file joint tax returns are unlikely to save much money, and the entire procedure of filing a joint return may prove to be in vain.

Things to Remember When Filing Tax Returns in AY

Transparency is needed when filing Tax Returns

Taxpayers should make it a point to be as clear as possible regarding their prior tax payments, the various forms used for paying taxes, and the receipts they obtained from the Income Tax Department after filing taxes online while completing tax returns during the current fiscal year. Receipts and other documentation should be gathered into a single file and then provided online when submitting returns.

If all essential documentation, such as capital gains tax statements, Form 16 A, and Form 26 S, are in place, tax refunds for a specific AY are much more likely to be generated promptly. There are no anticipated difficulties in the transfer of tax refund payments.

Tax Returns should be filed Online

The tax returns that are filed during the fiscal year should always be done online. During the fiscal year, e-filing of tax returns is extremely popular because it can be done at any time of day or night.

When using the E-Filing services for tax returns, taxpayers from all walks of life, including senior citizens and company owners, can sit at home and comfortably file their taxes. Filing tax returns online is a rapid process, and taxpayers who use the income tax department’s e-filing services do not have to worry about their tax return filing activities stretching over several weeks or months.

Tax Return Calculators ought to be made use of

  • Every taxpayer should use tax return calculators that are available online when filing tax returns during the current fiscal year.
  • Individual taxpayers can use such tax return calculators for free to create exact estimates of the tax deductions that can be claimed for income received in a certain financial year.
  • Online tax return calculators are typically updated regularly and can be used effectively on both iPhones and Android phones.

Therefore, if taxpayers have a correct grasp of what the two periods of FY and AY mean, the entire process of filing taxes in the FY and claiming refunds in the AY may be completed in a highly efficient manner. The FY always comes before the AY, and evaluations are always done in the later period after income has been earned in the first.