Assessment Year: [Sec. 2 (9)]
“Assessment Year” means the period of 12 months commencing on the 1st day of April every year. In India, the Govt. maintains its accounts for a period of 12 months i.e. 1st April to 31st March every year. As such it is known as Financial Year. The Income Tax department has also selected same year for its Assessment procedure.
The Assessment Year is the Financial Year of the Govt. of India during which income a person relating to the relevant previous year is assessed to tax. Every person who is liable to pay tax under this Act, files Return of Income by prescribed dates. These Returns are processed by the Income Tax Department Officials and Officers. This processing is called Assessment. Under this Income Returned by the assessee is checked and verified.
Tax is calculated and compared with the amount paid and assessment order is issued. The year in which whole of this process is under taken is called Assessment Year. At present the Assessment Year 2013-2014 (1-4-2013 to 31-3-2014) is going on.
Previous Year: [Sec. 3]
As the word ‘Previous’ means ‘coming before’ , hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year e.g. for Assessment Year 2013-2014 the Previous Year should be the Financial Year ending 31st March 2013. The term previous year is very important because it is the earned during the previous year is to be assessed to tax in the assessment year. The simple rule is that the income of a previous year is taxed in its relevant assessment year. At present the previous Year 2012-2013 (1-4-2012 to 31-3-2013) is going on.
The rule that the income of the previous year is taxable as the income of the immediately following assessment year has certain exceptions. These are:
1. Income of non-residents from shipping subject to following conditions
a) Assessee should be Non Resident (NR).
b) Assessee should own a Ship or Chartered by NR.
c) Business of carrying passengers, livestock, mail or goods shipped at a port in India.
d) The NR may (may not) have an agent in India.
2. Income of persons leaving India either permanently or for a long period of time subject to following conditions
a) It appears to the Assessing Officer that an Individual may leave India during the current Assessment Year (A.Y.) or shortly thereafter.
b) He has no present intention of returning to India.
c) The total income upto the probable date of his departure from India shall be chargeable to tax in that A.Y.
3. Income of bodies formed for short duration subject to following conditions
a) There is an Association of Persons (AOP) or a Body of Individuals (BOI) or an artificial judicial person, formed or established or incorporated for a particular event or purpose.
b) It appears to the Assessing officer (A.O.) that it is likely to get dissolved in the A.Y. in which it is formed or immediately after such A.Y.
4. Income of a person trying to alienate his assets with a view to avoiding payment of tax
a) It appears to the A.O. during any current Assessment Year that a person is likely to charge, sell, transfer, and dispose of any of his asset.
b) Such asset may be movable or immovable.
c) The intention is to avoid tax liability ; and
5. Income of a discontinued business. In these cases, income of a previous year may be taxed as the income of the assessment year immediately proceeding the normal assessment year. These exceptions have been incorporated in order to ensure smooth collection of income tax from the aforesaid taxpayers who may not be traceable if tax assessment procedure is postponed till the commencement of the normal assessment.