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Assessment Year” and “Previous Year” are terms commonly used in the context of income tax in many countries. These terms help define the time periods for which income is assessed and taxed. The meanings may vary slightly between different tax systems, but here is a general understanding:

  1. Previous Year (PY):
    • The “Previous Year” is the financial year in which an individual earns income that is subject to taxation.
    • It is the year immediately preceding the Assessment Year.
    • During the Previous Year, an individual earns income, and this income is assessed and taxed in the subsequent Assessment Year.
  2. Assessment Year (AY):
    • The “Assessment Year” is the year in which the income earned in the Previous Year is assessed and taxed.
    • It follows the Previous Year.
    • Tax returns for the income earned in the Previous Year are filed during the Assessment Year.

For example:

  • If the financial year in which you earn income is from April 1, 2022, to March 31, 2023, then the Previous Year is 2022-2023.
  • The Assessment Year for the income earned during 2022-2023 would be 2023-2024.

During the Assessment Year, individuals and businesses are required to file their income tax returns, declaring their income, deductions, and other financial details. The tax authorities use this information to assess the taxpayer’s liability and calculate the amount of tax owed or refundable.

It’s important to be aware of the specific definitions and rules in the tax system of the relevant country, as they may vary. Additionally, tax laws and terminology can change, so staying updated with the latest regulations is advisable.