Financial Year (FY)
A Financial Year (FY) is a 12-month period used for accounting, taxation, and financial reporting. It is the time frame during which income is earned, expenses are recorded, and financial statements are prepared.
In India, the financial year is the foundation for all tax-related calculations and compliance.
Financial Year in India
In India, the Financial Year runs from:
1st April to 31st March
For example:
FY 2024–25 refers to the period from 1st April 2024 to 31st March 2025.
All income earned within this period is considered for tax purposes.
What this really means
The financial year is the period in which your income is calculated.
Whether you are a salaried individual, a business owner, or a professional, all your earnings during this time are recorded and later used to determine your tax liability.
Once the financial year ends, the next step is filing your income tax return based on that income.
Financial Year vs Assessment Year
This is one of the most common points of confusion.
- Financial Year (FY) → The year in which income is earned
- Assessment Year (AY) → The year in which that income is assessed and taxed
Example:
Income earned in FY 2024–25 will be assessed in AY 2025–26.
Why Financial Year is Important
The financial year plays a central role in:
- Income tax return filing
- Tax calculation and compliance
- Preparation of financial statements
- Business accounting and reporting
- Financial planning and budgeting
It ensures that income and expenses are recorded in a consistent time frame.
Who Uses Financial Year?
- Individuals for income tax filing
- Businesses and companies for accounting
- Government for taxation and budgeting
- Professionals and freelancers for income reporting
