New income tax bill to introduce ‘Tax Year’: No more confusion of FY, AY as new bill is likely to remove assessment year, previous year
taxpayers. The concept of the tax year will replace the current concept of financial year (or previous year) and assessment year from the Income Tax Act, 1961. According to sources, the concept of the tax year is being introduced to reduce the complexity caused by various terms representing a specific time period in the context of income tax filing. This move is expected to simplify the meaning of the time period for payment of taxes, income tax return filing and other compliances that will be required to be fulfilled under the Income Tax Bill, 2025.
The tax year will be defined as the twelve months period of the financial year commencing on the 1st April. Further, the new tax bill says, in the case of a business or profession newly set up, or a source of income newly coming into existence in any financial year, the tax year shall be the period beginning with—
(a) the date of setting up of such business or profession; or
(b) the date on which such a source of income newly comes into existence, and,
ending with the said financial year.
Also read | New Income Tax Bill 2025 Expectations Live
It is important to note that there is no change in the definition of financial year. The financial year will start form April 1 and end on March 31, unlike other countries that follow calendar year (January 1 to December 31) as a financial year.
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