sunandaC

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Under the 1961 Act, the income earned in a year is taxed in the next year. The year in which income is earned is termed as 'previous year' and the following year in which it is charged to tax is termed as 'assessment year'.


For example if a person earns any income during the year beginning on 1 April 2006 and ending on 31 March 2007, then 2006-2007 will be the previous year and the income shall be assessed to tax in assessment year 2007-2008. The use of the two expressions has caused confusion in both compliance and administration.


In order to simplify the provisions, the separate concepts of 'previous year' and 'assessment year' will be replaced by a unified concept of 'financial year'.

The existing concept of assessment year will be done away with. Under the Code, all rights and obligations of the taxpayer and the tax administration will be with reference to the 'financial year'.


This change will not change the existing system of deduction of tax at source and payment of advance tax in the year of earning of income and payment of self-assessment tax in the following year before filing of tax return. This proposal will simplify the existing provisions.
 
Under the 1961 Act, the income earned in a year is taxed in the next year. The year in which income is earned is termed as 'previous year' and the following year in which it is charged to tax is termed as 'assessment year'.


For example if a person earns any income during the year beginning on 1 April 2006 and ending on 31 March 2007, then 2006-2007 will be the previous year and the income shall be assessed to tax in assessment year 2007-2008. The use of the two expressions has caused confusion in both compliance and administration.


In order to simplify the provisions, the separate concepts of 'previous year' and 'assessment year' will be replaced by a unified concept of 'financial year'.

The existing concept of assessment year will be done away with. Under the Code, all rights and obligations of the taxpayer and the tax administration will be with reference to the 'financial year'.


This change will not change the existing system of deduction of tax at source and payment of advance tax in the year of earning of income and payment of self-assessment tax in the following year before filing of tax return. This proposal will simplify the existing provisions.

Hey sunanda, thanks for the sharing the information on financial year and i am also uploading a document which would give some more details on financial year. Well, a fiscal year (FY) is a interval that an organization or government uses for accounting functions and organizing financial statements.
 

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