What is an assessment year (AY)?
Reviewed by Ranga & Company
AY: The assessment year (AY) is the year after the financial year in which income is earned, when that income is assessed and taxed. Income earned in FY 2025-26 is assessed in AY 2026-27.
At a glance
- Financial / previous year
- The year you earn the income (1 April – 31 March)
- Assessment year
- The following year, in which the return is filed and processed
- Example
- FY 2025-26 (April 2025 – March 2026) → AY 2026-27
- From 1 April 2026
- The Income-tax Act, 2025 uses a single 'tax year' instead
Why it matters
Returns, challans and notices refer to the assessment year. Selecting the wrong AY on a tax challan or in a return is a common and annoying mistake: the payment or return ends up in the wrong year and has to be corrected.
The new 'tax year'
Under the Income-tax Act, 2025, income earned from 1 April 2026 to 31 March 2027 is simply 'tax year 2026-27'. Returns for FY 2025-26 and earlier years still use the old FY/AY terms.
| Income earned | Old terms | New term |
|---|---|---|
| Apr 2025 – Mar 2026 | FY 2025-26 / AY 2026-27 | — (1961 Act) |
| Apr 2026 – Mar 2027 | — | Tax year 2026-27 |
Common mistakes
- Paying self-assessment tax against the financial year instead of the assessment year
- Filing a return for the wrong AY, especially belated returns
Frequently asked questions
What is the difference between FY and AY?
The financial year is when you earn income; the assessment year is the following year, when it is assessed. FY 2025-26 corresponds to AY 2026-27.
Which AY should I select for FY 2025-26?
AY 2026-27.
Does the assessment year still exist?
For income up to 31 March 2026, yes. From 1 April 2026 the Income-tax Act, 2025 uses a single 'tax year'.
Related terms
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From the blog
- GuidesThe Income-tax Act, 2025: What Changed From 1 April 2026The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. What the tax year means, what stays the same and how your next ITR is affected.
- GuidesMissed the ITR Deadline? How to File a Belated Return Before 31 December 2026Missed the 31 July or 31 August deadline for AY 2026-27? File a belated return by 31 December 2026. Late fee, regime rules, losses and the steps, explained.
- GuidesGot an Income Tax Notice? What Each Notice Means and How to ReplyA plain-English guide to income tax notices under sections 143(1), 139(9), 142(1), 143(2), 148A and 245: what each means, how long you have and how to reply.
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