Previous Year
Key Points:
- Previous Year:
- Starts on April
1 and ends on March 31 of the following calendar year.
- Example: If income
is earned between April 1, 2023, and March 31, 2024, this period
is called the Previous Year 2023-24.
- Assessment Year:
- The year
immediately following the Previous Year in which the income of the
Previous Year is assessed and taxed.
- Example: Income
earned in Previous Year 2023-24 is assessed and taxed during Assessment
Year 2024-25.
- Relevance in Tax
Filing:
- While filing
Income Tax Returns (ITR), taxpayers mention the Assessment Year
because the income is being assessed during this year.
Exception of Previous Year in Income
Tax
In income tax, the general rule is that
the income earned during a previous year is taxed in the assessment year that
follows. However, there are certain exceptions where income is taxed in the
same year it is earned. Here are some key exceptions:
Association of Persons (AOP)/Body of
Individuals (BOI)/Artificial Juridical Person formed for a particular event or
purpose.
Persons likely to transfer property
to avoid tax.
Discontinued Business: If a business is
halted during the previous year, the income earned up to the date of
discontinuation is assessed in the same year.
Shipping Business Income earned by a
non-resident in India (Section 172): Tax is levied in the previous year itself.
Income earned by individuals leaving India
permanently or for a long period of time (Section 174): The probable income
until the individual’s departure is taxable in the previous year.
Income earned by bodies formed for a short
period (Section 174A): Tax is collected in the previous year itself.
These exceptions ensure that the tax can
be collected efficiently, especially in cases where it might be difficult to
recover the tax later.
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