What is Assessment Year?
Also called: AY
The assessment year is the twelve months following the financial year in which income was earned, and it is the year in which that income is assessed and taxed.
Income earned between 1 April 2025 and 31 March 2026 falls in financial year 2025-26 and is assessed in assessment year 2026-27. The return filed in July 2026 therefore says "AY 2026-27" even though it reports the previous year's income.
Selecting the wrong year on the income tax portal is one of the most common filing errors, and it results in the payment sitting against a year with no liability while the correct year shows a demand.
Why it matters
Every challan, return and notice references an assessment year. Getting it wrong means your tax is paid against the wrong period.
A worked example
Income earned between 1 April 2025 and 31 March 2026, and the labels that apply to it.
| Financial year (the year you earn) | FY 2025-26 |
|---|---|
| Assessment year (the year you file for it) | AY 2026-27 |
| Return due date, non-audit | 31 July 2026 |
| Belated return deadline | 31 December 2026 |
| Updated return window closes | 31 March 2031 |
Selecting AY 2025-26 on a challan for income earned in FY 2025-26 is the single commonest data-entry error in Indian tax, and it puts the payment in the wrong year where the return cannot consume it.
The statutory position
| What | Position | Source |
|---|---|---|
| Financial year | 1 April to 31 March | Section 3, Income-tax Act 1961 |
| Assessment year | The 12 months beginning immediately after the financial year | Section 2(9), Income-tax Act 1961 |
| Updated return window | Up to 48 months from the end of the assessment year | Section 139(8A), as extended by Finance Act 2025 |
Not to be confused with
These get used interchangeably, including by tools that should know better. They are different things.
Financial year
The financial year is when the income arises. The assessment year is the following year, when it is assessed. Every challan and every return asks for the assessment year, which is always the later of the two.
Calendar year
India's tax year runs April to March, not January to December. A foreign employer's payroll year rarely lines up, which is what makes a first Indian return after relocation confusing.
Questions people ask
Which one do I put on a challan?
I picked the wrong year. Can it be corrected?
What usually goes wrong
- Selecting the financial year on a challan where the assessment year was asked for
- Filing the wrong year's return entirely after a gap of several years
- Assuming the updated return window is the same as the belated one — it is years longer, and it exists precisely for old years