For example, the period starting from 1 April 2012 and ending on 31 March 2013 will be treated as the financial year (FY) 2012- 2013, or the accounting year 2012-2013. It can also be called as the previous year of the assessee. Income tax is payable on the income of this previous year.
Another important terminology commonly used under the income tax law is “Assessment Year” (AY).
Assessment year means the period of 12 months commencing on the first day of April of every year and ending on 31 March of the next financial year following the previous year. Thus, if the previous year (or accounting year or financial year) is 2012-2013 (starting from 1 April 2012 and ending on 31 March 2013), then the corresponding assessment year would be 2013-2014. When we ifie income tax return and when we talk of any notice received from the Income Tax Department. the terminology generally used is the assessment year. Hence, whenever you file your income tax return and you receive any notice from the Income Tax Department, then please make sure as to which is the year which is written in the said notice in short form as AY or the Assessment Year.