Understanding the Tax Year in India: Meaning, Example, Start and End Date

Parliament introduced the Final Income Tax Bill 2025 on February 13, 2025. A key change in this bill is the new Tax Year. It replaces both the Financial Year (FY) and the Assessment Year (AY). This move aims to simplify tax compliance for individuals and businesses.

In this article, we’ll break down what a tax year is, how it affects taxpayers, and why lawmakers introduced it.

What is a Tax Year?

A Tax Year is the new term replacing both the Financial Year (FY) and Assessment Year (AY) in India's tax system. It is a 12-month period starting from April 1 to March 31 of the following year.

But here’s where it gets interesting:

• If you start a new business during the financial year, your tax year begins on that date. It ends on March 31.
• You start your tax year when you first earn money from a new source. This includes income from investments or rental properties.

Taxpayers will now track their income in one clear period. This change removes confusion between FY and AY!

Why Was the Tax Year Introduced?

Before, India used two separate terms for tax calculations:

• Financial Year (FY): The year in which individuals or businesses earn income.
• Assessment Year (AY): The year in which income tax is filed for the previous financial year.

This often led to confusion among taxpayers. The new tax year replaces both FY and AY, ensuring that:

" The tax year makes tax compliance simpler. It helps people and businesses file their online income tax returns easily. "

• Tax filing becomes easier and more transparent.
• There is no need to refer to two different years.
• It aligns India’s tax system with global best practices.

Why Was the Term Financial Year Not Used?

The Financial Year (FY) matters for legal tasks like audits and filings. But the Tax Year sets the timeframe for earning and evaluating income.

Can a Tax Year Be Less Than 12 Months?

Yes! In certain cases, a tax year may be shorter than 12 months. For example:

• If a business starts in the middle of a financial year, the first tax year will be from the start date until March 31.
• If a new source of income arises within a year, the tax year will begin on that date.

This flexibility ensures a smoother transition for businesses and individuals using Income Tax Return Services in Delhi or elsewhere.

Tax Year vs. Financial Year vs. Assessment Year

Aspect	Tax Year (New)	Financial Year (Old)	Assessment Year (Old)
Definition	Period for earning and reporting income	Year when income is earned	Year when tax is assessed
Duration	April 1 – March 31	April 1 – March 31	April 1 – March 31 (next year)
Tax Filing	Filed after Tax Year ends	Used for income-earning period	Tax return filed in this year

" Looking for top tax consultation in Delhi? This change makes tax calculations easier and helps with compliance. "

Will This Affect My Tax Filing?

Yes, but in a positive way! Here’s how:

• No more confusion between FY and AY—one tax year.
• Tax deadlines stay the same. They are July 31 for individual returns, unless the government extends them.
• Businesses gain greater clarity about tax obligations.

Special Cases: When the Tax Year is Less Than 12 Months

If you start a business on October 1, 2026, your first tax year will run from October 1, 2026, to March 31, 2027. From the next year onward, it will follow the usual April 1 to March 31 cycle.

Conclusion: How This Change Helps Taxpayers

The Tax Year helps make filing income tax returns easier. It also clears up confusion. Whether you’re a taxpayer, business owner, or investor, this is a big step. It leads to a simpler and more efficient tax system.

Don't stress about FY and AY confusion. Focus on earning and filing your taxes with precision. Choose the best tax return filing company in Delhi!