Previous Year and Assessment Year: These are two important terms that every tax payers should understand as both the terms are very important from Income Tax point of view.
As you might heard the term financial year, which begins on 1st April of a particular year and ends of 31st March, and In Income-Tax, Income earned during the financial year will be taxed in subsequent financial year (exception TDS-Tax deduction at source, where income tax is paid during the year itself).
From above, you may observe that income earned in one financial year is taxed in another financial year, therefore two terms were defined in Income Tax Act, i.e. Previous Year and Assessment Year.
Both Previous Year and Assessment Year are Financial year meaning, both will begin from 1st April and ends on 31st March. Now lets see, what both the terms in detail:
From above you may understand that income earned during the previous year would be taxable in assessment year. However, there are certain exception to this rule, as stated below:
The basic purpose of taxing above businesses in the same year in which income is earned i.e., in previous year itself, that these persons as involved in above cases, might not be available in assessment year i.e., in subsequent next year.
I hope you like reading our above article and we hope it might give you some insight about the very basic terms but yet very important to understand.
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