Financial Year and Assessment Year are two very crucial terms that tax payers need to be familiar with in order to be able to file their taxes and their tax returns in a smooth and hassle free manner without any confusion.
Nowadays tax filing is a very easy process and it can be carried out online from the comfort of either the office place or the home. The process of filing taxes or tax returns is not a very long drawn out one either and gets over with by an hour or so.
We provide our customers with high quality tax filing services that can be availed at any and every time of the year. We also take it upon ourselves to explain crucial financial terms like assessment year and financial year to our customers so that they are never in the dark about how the tax filing activities are carried out.
Important Differences Between AY and FY
Financial Year is the year or the time period within which income is earned. The assessment year is the year that follows the financial year and it is the period in which tax returns are filed.
Both FY and AY end on the 31st of March and begin on the 1st of April. Financial Year is therefore the year in which business people, salaried professionals and senior citizens earn their money while the following year which is AY is the time when the income that has been previously earned gets evaluated.
Taxation and evaluation is carried out for income which has been earned in the year prior to AY, which is the financial year. It is for this reason alone that Income Tax Return Forms are known to use the term AY instead of FY.
While income is always earned in the period known as the financial year, it cannot ever be taxed prior to having been earned. Hence it is only after money has first been earned by an individual that it will be evaluated for the purpose of taxation and the latter is what takes place during the assessment year.
FY and AY for Recent Years
April 1st 2015 – March 31st 2016
2016 - 2017
2015 - 2016
April 1st 2014 – March 31st 2015
2015 - 2016
2014 - 2015
April 1st 2013 – March 31st 2014
2014 - 2015
2013 - 2014
Vital Things to Know When Filing Tax Returns During AY
- It is necessary for tax payers to remember that AY and FY are two very different time periods when they embark upon the process of filing their tax returns.
- The ITR forms that are issued will always use the term AY and it is important for tax payers not to confuse this term with FY.
- The documents that are referred to by tax payers in the ITR form such as Form 26AS, Form 16 A, capital gains statement and tax deducted at the source or TDS shall all be for the financial year.
- In fact FY is used for all the proofs that are submitted for evaluation during the AY.
- Tax payers always need to bear in mind that income shall get assessed only after the financial year has come to an end.
Crucial Things to Remember When Filing Taxes During FY
Deductions can be claimed without showing Receipts
One of the most important points that ought to be noted by regular tax payers is that deductions can be claimed in the FY without showing any receipts. For this purpose tax payers have to gather as much documented information as possible from people who can vouch for their expenses, keep video records or photo records as well as the dates on which specific items were bought, keep detailed journal entries, diaries or other forms of written records in addition to the dates on which any services or items were purchased.
Any tangible proof for expense or activity shall do if it manages to verify situations for which tax deductions are being claimed.
Organized Accounts of Expenses must be kept
An important tax strategy that tax payers can deploy in order to save money on tax payments in the financial year or FY is to keep organized records of expenses. If receipts are not well organized and that too in a timely manner, it is possible on the part of a tax payer to overlook large deductions that may prove highly damaging for him on the financial front.
Tax Payers should get Educated about Tax Filing Procedures and how they work
An effective way by which tax payers can know more about tax payment procedures online and elsewhere, is to educate themselves. There are certified courses on taxation offered in local colleges as well as schools that may be undertaken in this regard.
Tax Preparation Software can be used for Convenient Tax Filing
- Tax preparation software can also be downloaded from the internet for the smooth filing of taxes in FY.
- This software is free and easy to use and is also free from viruses of any sort.
- The Free File Program offered by IRS is something that can be availed by tax payers to go ahead and make their tax payments in a timely manner without spending any money at all.
IRS Toll Free Facilities should not be relied upon
- It would be a good idea not to rely on IRS Toll Free services when filing tax returns in a particular financial year.
- Such services are not a hundred percent accurate and may vary for different tax payers.
- Tax payers may just have to end up filing additional taxes later with interest because of the misinformation received from IRS service professionals.
Income from Deposits should be shifted
Tax payers who receive income from fixed or recurring deposits should strongly consider shifting this income to the bank accounts of their children if they have any. By doing so, they shall be able to save a huge amount of tax for a specific financial year.
Filing Joint Returns should be strictly Avoided in FY
Married couples should consider filing tax returns separately. This is because those who claim tax returns jointly are not likely to save much money upon doing so and the entire process of filing a joint return might prove to have been done in vain.
Things to Remember When Filing Tax Returns in AY
Transparency needed when filing Tax Returns
When Filing Tax Returns during AY tax payers need to make it a point to be as transparent as possible about their past tax payments, the various forms used for filing taxes and the receipts they received from the Income Tax department after filing taxes online. The receipts and other documents should be organized in one single file and then submitted at the time of filing the returns online.
If all required documents are in place such as capital gains tax statements, Form 16 A and Form 26 S then it is more than likely for the tax refunds for a particular AY to be generated in a timely manner. There are no glitches that are likely to take place in the transfer of tax return funds.
Tax Returns should be filed Online
The tax returns that are filed during the AY are those that should always be carried out online. The e filing of tax returns during AY is a process that is hugely popular as it can be done at any given hour of the day or night.
Tax payers from all walks of life including senior citizens and business people can sit and file their returns in a comfortable manner from home when they opt for the E Filing services for tax returns. Filing tax returns online is a quick process and tax payers do not have to worry about their tax return filing activities running into several weeks or months when they select the e filing services made available by the income tax department.
Tax Return Calculators ought to be made use of
- When filing tax returns during AY it would be a good idea for every tax payer to make use of tax returns calculators that are accessible online.
- Such tax return calculators may be used for free and generate accurate figures of the tax deductions that may be claimed by individual tax payers for the income that is earned in a specific financial year.
- The tax return calculators that are available online are usually updated on a regular basis and can be used quite efficiently in both the I Phones and Android phones.
Thus, the entire process of filing taxes in the FY and claiming returns in the AY can be carried out in a highly efficient way provided tax payers have a correct understanding of what the two periods of FY and AY signify. The FY always comes before AY with evaluations always being carried out in the latter period once income has been earned in the former period.
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