Tax filing has become easy and convenient unlike earlier times, thanks to technological advancements and online filing. However, knowing the basics of tax filing is non-negotiable. This includes understanding the major accounting terms, their differences, significance and functions. The Financial Year (F/Y) and the Assessment Year (A/Y) are two such important keywords. Understanding these terms and their functions can help in ensuring a smooth tax filing experience.
The assessment year, in simple words is a term used to describe the assessment of income for a particular financial year. Assessment year is the time period during which individuals file their income tax returns to the tax authorities for the preceding financial year. It comes after the financial year. It is also abbreviated as (AY). Subsequently, the income tax department assesses these returns and determines the net tax liability of the individual. This period is crucial as it is when individuals are required to settle their tax obligations and pay any dues.
The financial year is the time period during which the individual is considered to have received income. It starts on April 1st of the year and ends on March 31st of the subsequent year. It is also abbreviated as FY. The financial year, in simple words, is the preceding year of the assessment year.
For example, the financial year 2023-24 (FY23-24) starts on April 1, 2023, and ends on March 31, 2024. The assessment year for this financial year would be after the financial year. That is from April 1st, 2024 to March 31st ,2025 (AY24-25).
During the assessment year, individuals are required to provide a comprehensive breakdown of their earnings, deductions, and taxes paid in the preceding year. This is the time when authorities review and verify all information submitted in the Income Tax Return (ITR) to ensure compliance with the laws and regulations. It is also an opportunity for individuals to correct any errors or discrepancies in their tax forms. They can file a revised return within a specified timeframe during the assessment year, allowing time for corrections and ensuring precise reporting of income and taxes.
- Get all documentation regarding your income, such as investment proofs, salary slips, bank statements etc.
- Depending on your income and category choose the ITR form from ITR-1 to ITR-7.
- Make an account on the official Income Tax e-filing portal: https://www.incometaxindiaefiling.gov.in/.
- Enter all your income details, deductions and categories.
- Link your PAN card or Aadhaar card to your ITR (mandatory)
- Based on the income and deductions declared, calculate the tax liability
- Upload the complete ITR form on the e-filing portal if filing online
- Complete the verification procedure which can be done offline by delivering a physical ITR-V to the CPC or online by Aadhaar OTP, EVC.
- Keep the supporting documents and completed return documentation for future reference.
- Choosing the right tax regime is of utmost importance, as it can create a significant difference in the deductions and the tax savings that follow.
- For individuals with significant deductions and exemptions, the old regime might be a better option as it allows them to reduce their tax liability substantially. On the other hand, for individuals with limited deductions, the new regime might be a better option due to the lower tax rates.
- Invest in Unit Linked Insurance Plans (ULIP)
- Use ELSS funds to invest in equity funds
- Some of the top tax-saving investment ideas for 2024 that can maximize tax benefits include:
- Pension Plans
- Endowment plans
- PPFs
- Health insurance or Mediclaim
- NPS
- Tax-saving mutual funds
As the assessment year follows the financial year, the present assessment year (AY) is 2023-24 for the financial year (FY) 2022-23.
The assessment year is the period during which an individual’s or business’s income is evaluated for taxation purposes. It is a vital factor since it influences the tax liability for an entire financial year. In cases where there have been losses during a financial year. The assessment year specifies the period during which these losses can be carried forward and adjusted against future revenue.
The financial year is the period during which individuals earn income. Since income cannot be taxed until earned, it is evaluated and taxed in the subsequent assessment year. This is to prevent any financial complications during the financial year. Therefore, the assessment year is critical in the context of Income Tax Returns (ITR).
Yes, a revised return can be filed at any time before the conclusion of the relevant Assessment Year (AY). If you filed your tax return on time, you may file a revised version under Section 139(5) of the Income Tax Act within one year after the end of Assessment Year.
Step 1: Go to https://www.incometax.gov.in/iec/foportal/ website and login to your account.
Step 2: Under the ‘Services’ column, select the ‘challan correction’ option.
Step 3: A new webpage will open and select “Create Challan Correction Request”
Step 4: The income tax portal will ask you to select the option that needs correction. Here you can change the assessment year.
Step 5: After correction, click on continue.
In short, the assessment year occurs after the financial year and includes the evaluation, calculation, and payment of taxes based on revenue acquired during the preceding year. Adhering to tax regulations and timelines in India is essential for all businesses to ensure legal compliance and avoid any penalties. It is crucial to the taxation process, as it allows taxpayers to evaluate their income. By leveraging smart tax planning strategies, taxpayers maximize their financial outcomes and maintain compliance with laws and regulations.
Enforcing a standard compliance procedure can help streamline tax-related tasks during the assessment year. HRMS software like PayWheel simplifies tax processes with automated calculations and deductions, including state-specific PF slabs. It enables users to download tax forms and generate reports such as income tax, PT, and PF ESI reports. Also, it offers tools like a CTC calculator, investment declaration, and IT projection reports, with pending tax payments for individuals and the organization. Furthermore, PayWheel also helps with automated attendance tracking and leave management, contributing to a smoother tax filing experience.
