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You usually start with a simple goal, which is to file your ITR and move on. Then you come across a form that asks for an AY, your Form 16 talks about an FY, your bank statement shows TDS, and suddenly you are wondering why the labels do not match. This is not just terminology. If you choose the wrong year, you can end up filing in the wrong window, picking the wrong ITR form, or mismatching credits like TDS that should have shown up automatically. The good news is that once you understand the two timelines, everything else starts to feel logical.
What is a Financial Year (FY)?
A financial year is the 12-month period in which you earn your income and incur your expenses. In India, the financial year runs from April 1 to March 31. That is why your salary slips, freelance invoices, interest from deposits, and capital gains are all grouped into one FY even though they cross two calendar years. This is also why your employer’s payroll and your bank’s interest certificate talk in FY language.
What is an Assessment Year (AY)?
An assessment year is the year that comes right after the financial year. It is the year in which your income for the previous FY is assessed by the tax department and you report that income in your return. Think of FY as the “earning year” and AY as the “reporting and assessment year.” The Income Tax Department uses this structure, so income earned in one defined period is evaluated and taxed in the next defined period.
So, what is an assessment year in income tax terms? It’s quite simple. You earn first, then you report and pay. For example, income earned in FY 2025–26 is assessed in AY 2026–27.
What is the Assessment Year Now?
You can answer what the assessment year is now in two practical ways, depending on what you mean by “now.”
If you mean the AY you are currently in on the calendar, for instance, February 10, 2026, you are in AY 2025–26, because AY 2025–26 runs from April 1, 2025 to March 31, 2026.
If you mean the AY you will use to file the return for the income you are earning right now, then you are earning in FY 2025–26, and that income will be filed and assessed in AY 2026–27.
Most people asking what the assessment year now is actually mean the second one, because they want to know which year to select while filing their return.
Where TDS fits
TDS stands for Tax Deducted at Source. It means tax is deducted at the time of payment, then deposited to the government on your behalf, and you later claim that credit in your return. If your employer deducts TDS from your salary, or your bank deducts TDS on interest, that credit is linked to your PAN and reflects in your tax records. When you file your return for the relevant FY, you use that TDS credit to reduce your final payable tax or to increase your refund.
This is why year selection matters. Your TDS credit belongs to the FY in which the income was paid or credited, and you claim it in the AY immediately after that FY.
How do you file the ITR
When you file ITR, most portals or forms ask you to pick the assessment year. You should choose the AY that comes immediately after the FY in which you earned the income. Then you report your income details for that FY.
A quick self-check can save you from mistakes. If your documents say FY 2025–26, you should be selecting AY 2026–27 while filing. If your documents say FY 2024–25, you should be selecting AY 2025–26 while filing ITR.
How an income tax calculator helps you avoid surprises
An income tax calculator is useful because it forces you to organise your numbers in the same order the tax return expects. You plug in salary, interest, capital gains, deductions, and exemptions for the relevant FY, and it estimates your tax for that income. Then you compare that estimated tax against your TDS and advance tax already paid. That gap is what usually becomes your refund or your additional payable amount.
The key is that you should calculate based on the FY figures, then file in the AY that follows.
Common mistakes you should actively avoid
Choosing the wrong year
This is the most common error, especially when you try to file close to the end of a cycle. Always tie it back to the FY printed on Form 16, interest certificates, and capital gains statements.
Assuming TDS is the final tax
TDS is only a prepayment. Your final tax depends on your total income, deductions, and the tax regime you use.
Mixing calendar year with FY
Your January-to-December bank summary is not your tax year in India, because the FY runs April-to-March.
You might come across more discussions about a single “tax year” concept replacing the older FY and AY language in future reforms. Some of these discussions point in this direction in the context of proposed tax law changes. Still, as of today, FY and AY remain the practical labels you must use for return filing and compliance.
The simplest way to stop getting confused is to attach each document to a timeline before you even open the ITR form. Your payslips, bank interest, and investment gains belong to the FY. Your return filing screen will ask for the AY that comes right after that FY. Once you align the two, the rest becomes routine. Your TDS will match more cleanly, your refund expectations will be realistic, and you will stop second-guessing basic items like what the assessment year is and the difference between assessment year and financial year.
