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.
Updated 2026-10-08Source: Income-tax Act · CGST Act · CBDT/CBIC
What it means
Under the Income Tax Act, 1961 (income up to 31 March 2026), the year you earn in is the "previous year" (the FY) and the next is the assessment year (AY, defined in Section 2(9)), when that income is assessed and the return filed:
- FY (Financial Year): the 12 months from 1 April to 31 March during which you earn income. Example: FY 2025-26 runs from 1 April 2025 to 31 March 2026.
- AY (Assessment Year): the next financial year. Example: FY 2025-26 is AY 2026-27.
From 1 April 2026 the Income-tax Act 2025 drops the assessment year: FY 2026-27 is simply "tax year 2026-27" (s.3(1)), and that is the label the tax-payment screen asks you to select. A freelancer's non-audit return is due 31 August after the year ends (31 July applies only to salary and other-income returns). Advance tax instalments fall during the year itself.
A worked example
Income earned on 15 March 2027 belongs to tax year 2026-27 — there is no assessment year for it. Its return is due 31 August 2027; advance tax on it was due 15 Jun / 15 Sep / 15 Dec 2026 and 15 Mar 2027 (one instalment by 15 March for presumptive filers). Income earned on 15 March 2026 belongs to FY 2025-26 (AY 2026-27), with its return due 31 August 2026.
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. From FY 2026-27 onward, say "tax year 2026-27": picking AY 2026-27 on a challan for that income sends the credit to the wrong year.
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Income-tax entries cite the Income-tax Act 1961, which governs FY 2025–26 (the return filed in 2026); from tax year 2026–27 the Income-tax Act 2025 applies, with new section numbers shown where we give them. GST law is unchanged. General information, not tax advice; verify with your CA before you file.
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