A “Year” is very important. The Income Tax Act (ITA) and Foreign Exchange Management Act (FEMA) both mention various years, such as Assessment Year, Previous Year, Financial Year, Calendar Year, Preceding Year, etc. The deadlines, reporting requirements, limits, etc. are prescribed based on a “Year”. It is very important to understand the differences between the various definitions of a “Year”.
Assessment Year (A.Y.): An Assessment Year is a year in which the income tax is assessed. As per the ITA, an assessment year is a period of 12 months commencing on 1st April every year. The incomecan be assessed (charged to tax or taxcan be calculated) only afterthe income is generated i.e. after the completion of a year in which income was earned.
Previous Year (P.Y.):As per the ITA, a Previous Year is the financial year immediately preceding the assessment year. The income earned during the previous year is assessed or taxed in the assessment year.
Financial Year (F.Y.): A Financial Year is a period of 12 months commencing on the 1st day of April and ending on the 31st day of March every year.
Calendar Year: A Calendar Year is a period of 12 months commencing on the 1st day of January and ending on the 31st day of December every year.
Preceding Year: A Preceding Year is the year prior to the current year. A Preceding Financial Year is the year prior to a period of 12 months commencing on the 1st day of April and ending on the 31st day of March. A Preceding Calendar Year is a year prior to a period of 12 months commencing on the 1st day of January and ending on the 31st day of December.
Example: Mr. Mohan, Mr. Narendra and Mr. Abhay Charan each sold an apartment on October 20, 2013, January 26, 2014 and April 17, 2014 respectively. The various years for the sale of the three apartments would be as given under:
| Particulars | Mohan (Oct 20, 2013) | Narendra (Jan 26, 2014) | Abhay (Apr 17, 2014) |
| Assessment Year | 01-Apr-14 to 31-Mar-15 (A.Y. 2014-15) | 01-Apr-14 to 31-Mar-15 (A.Y. 2014-15) | 01-Apr-15 to 31-Mar-16 (A.Y. 2015-16) |
| Previous Year | 01-Apr-13 to 31-Mar-14 (P.Y. 2013-14) | 01-Apr-13 to 31-Mar-14 (P.Y. 2013-14) | 01-Apr-14 to 31-Mar-15 (P.Y. 2014-15) |
| Financial Year | 01-Apr-13 to 31-Mar-14 (F.Y. 2013-14) | 01-Apr-13 to 31-Mar-14 (F.Y. 2013-14) | 01-Apr-14 to 31-Mar-15 (F.Y. 2014-15) |
| Calendar Year | 2013 | 2014 | 2014 |
| Preceding Assessment Year | 01-Apr-13 to 31-Mar-14 (A.Y. 2013-14) | 01-Apr-13 to 31-Mar-14 (A.Y. 2013-14) | 01-Apr-14 to 31-Mar-15 (A.Y. 2014-15) |
| Preceding Previous Year | 01-Apr-12 to 31-Mar-13 (P.Y. 2012-13) | 01-Apr-12 to 31-Mar-13 (P.Y. 2012-13) | 01-Apr-13 to 31-Mar-14 (P.Y. 2013-14) |
| Preceding Financial Year | 01-Apr-12 to 31-Mar-13 (F.Y. 2012-13) | 01-Apr-12 to 31-Mar-13 (F.Y. 2012-13) | 01-Apr-13 to 31-Mar-14 (F.Y. 2013-14) |
| Preceding Calendar Year | 2012 | 2013 | 2013 |