An Assessment Year (AY) refers to the 12-month period — from April 1 to March 31 of the following year — in which you file your Income Tax Return (ITR) for income earned in the previous Financial Year (FY).
For instance, income earned between April 1, 2022, and March 31, 2023 (FY 2022–23) will be assessed in AY 2023–24. This is when the Income Tax Department reviews returns, processes refunds, and determines tax liabilities.
Understanding the difference between FY and AY ensures you meet tax deadlines, avoid penalties, and plan your investments more effectively.
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Example of Assessment Year (AY)
To illustrate, consider the period from April 1, 2022, to March 31, 2023, which is the Financial Year (FY) 2022-23. The income earned during this time is assessed in the subsequent Assessment Year, AY 2023-24, spanning from April 1, 2023, to March 31, 2024. This means taxpayers will file their income tax returns for the income earned in FY 2022-23 during AY 2023-24.
Common mistakes to avoid when filing taxes for the Assessment Year (AY)
Filing income tax returns can be intricate, and taxpayers often make errors that may lead to penalties or delays in refunds. Here are common mistakes to avoid:
- Incorrect personal information: Ensure your name, PAN, and contact details are accurate to prevent processing issues.
- Choosing the wrong ITR form: Select the appropriate Income Tax Return (ITR) form based on your income sources and category.
- Omitting income sources: Report all income, including interest from savings accounts, fixed deposits, and rental income.
- Mismatch in TDS details: Verify that Tax Deducted at Source (TDS) details match Form 26AS to avoid discrepancies.
- Ignoring deductions: Claim eligible deductions under sections like 80C, 80D, etc., to reduce taxable income.
- Errors in tax computation: Accurately calculate tax liability considering applicable slabs and cess.
- Not reporting exempt income: Disclose exempt income, such as agricultural income, even if it's non-taxable.
- Failure to carry forward losses: Properly report losses to carry them forward for future set-off.
- Neglecting to verify the return: Complete the verification process after filing; unverified returns are considered invalid.
- Missing the filing deadline: File returns by the due date to avoid late fees and interest penalties.
- Not maintaining records: Keep all supporting documents for income and deductions claimed for future reference.
- Incorrect bank details: Provide accurate bank account information to ensure timely credit of refunds.
- Overlooking advance tax payments: Pay advance tax if liable to avoid interest on unpaid taxes.
- Filing multiple returns: Avoid submitting multiple returns for the same Assessment Year; it can cause confusion.
- Not disclosing foreign assets: Report foreign assets and income to comply with legal requirements.
Avoiding these mistakes can lead to a smoother tax filing experience and prevent potential legal complications.
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