Financial Year, Assessment Year and the New 'Tax Year': What Changed in 2026

For sixty-five years Indian taxpayers juggled two labels for the same income: the financial year in which you earned it and the assessment year in which it was taxed. That ends with income earned from 1 April 2026. The Income-tax Act, 2025 replaced both with a single tax year — but returns filed in 2026 still use the old labels, GST never used assessment years at all, and company law has its own financial-year rule. This guide is for business owners, accountants and anyone filling in a tax form who wants to get the year right. It explains each term, maps old labels to new, and ends with the due-date calendar for 2026-27.

Quick answer

The financial year (FY) is the 1 April–31 March year in which you earn income and keep accounts. Under the 1961 Act, the assessment year (AY) was the following year, in which that income was assessed — income of FY 2025-26 is AY 2026-27. From 1 April 2026, the Income-tax Act, 2025 uses one term, the tax year: income of FY 2026-27 is tax year 2026-27, and there is no assessment year.

• FY = April to March, for income tax, GST, company accounts and the Union Budget

• Returns filed in 2026 (income of FY 2025-26) still say AY 2026-27 — the 1961 Act governs them

• Income from 1 April 2026 = tax year 2026-27, return due in 2027

• A new business's first tax year runs from its start date to 31 March

• Companies follow the April–March year under s.2(41) of the Companies Act, with a narrow exception for foreign groups

What is a financial year?

A financial year is the twelve-month period for which a government, business or person measures income, closes accounts and pays tax. In India it runs from 1 April to 31 March. The General Clauses Act, 1897 — which supplies default meanings for words used in central laws — defines "financial year" in section 3(21) as the year commencing on the first day of April. Every central tax law, the Union Budget and company accounts follow the same year unless a specific law says otherwise.

Financial years are written with both calendar years: FY 2026-27 means 1 April 2026 to 31 March 2027. Some forms abbreviate it as "2026-2027" or "FY27". If someone says "this financial year" in October 2026, they mean FY 2026-27; "last financial year" means FY 2025-26, which ended on 31 March 2026.

For a business, the financial year sets the rhythm of almost every compliance. Your books close on 31 March. Stock is counted and valued on that date. Depreciation is calculated for the year. GST annual returns, income-tax returns, tax audits, company financial statements and LLP filings all relate to the year that ended on 31 March, and fall due in the months that follow.

The three years at a glance

1 Apr – 31 Mar

Financial year in India

General Clauses Act s.3(21)

FY + 1

Assessment year (1961 Act)

Income of FY 2025-26 = AY 2026-27

1 April 2026

Tax year replaces PY/AY

Income-tax Act, 2025

31 August

ITR due — non-audit business

Finance Act 2026

What is an assessment year?

Under the Income-tax Act, 1961, the year in which you earned income was called the previous year — in practice, the financial year. The assessment year was the twelve months starting the following 1 April, during which the income of the previous year was assessed: you filed the return, paid any balance tax and the department processed it. So income earned in FY 2025-26 (the previous year) was assessed in AY 2026-27, and that is the year you select when you file the return in July or October 2026.

The two-year labelling was a constant source of mistakes. People picked the wrong year on challans for self-assessment tax, quoted the wrong year in replies to notices, or confused banks with "ITR for AY 2025-26" when the bank wanted FY 2025-26 figures. Tax rates in each year's Finance Act were also stated "for the assessment year", which meant the rates you paid on FY 2025-26 income were the ones the Finance Act fixed for AY 2026-27.

The assessment year is not gone from the system yet. The Income Tax Department has said that the 1961 Act, although repealed from 1 April 2026, continues to govern all years that began before that date. Returns for income of FY 2025-26, revised returns, updated returns, rectifications, notices and appeals for those years all continue to carry assessment-year labels. For roughly the next several years you will see both systems side by side.

The 'tax year' under the Income-tax Act, 2025

The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the 1961 Act from that date. Section 3 of the new Act introduces the tax year: the twelve-month financial year beginning on 1 April. Income tax is charged on the total income of the tax year at the rates fixed for that tax year, and the return for it is filed after the year ends — just as before. What disappears is the second label. The department's own explanation is that the tax year corresponds to the old "previous year", and that the term "assessment year" has been discontinued.

Section 3 also deals with businesses that start mid-year. If a business or profession is set up, or a new source of income comes into existence, during a financial year, the tax year for it begins on the date of setting up (or the date the source comes into existence) and ends on 31 March. A shop that opens on 1 December 2026 therefore has a first tax year of four months, 1 December 2026 to 31 March 2027, labelled tax year 2026-27. That mirrors how the 1961 Act treated a new business's first previous year.

The transition rule is in section 536. Under section 536(3), a reference to a tax year in relation to the period before 1 April 2026 is read as a reference to the corresponding previous year under the 1961 Act. In plain terms: tax year 2024-25 corresponds to previous year 2024-25, which in turn corresponds to AY 2025-26. Proceedings for those older years — pending or started later — continue under the 1961 Act's procedure.

The label is not the only thing that changed. The 2025 Act renumbered almost everything: TDS provisions that sat in sections 192 to 194S of the 1961 Act now sit mainly in sections 392 (salary) and 393 (other payments), the tax audit provision is section 63, and return filing is section 263. The Income-tax Rules, 2026 brought new form numbers too — quarterly TDS statements, for example, moved from Forms 24Q and 26Q to Forms 138 and 140 from 1 April 2026. When a form or notice cites a section, check which Act it refers to before you look it up. Our TDS guide maps the main TDS sections.

Financial year vs assessment year vs tax year

The table below puts the three ideas side by side for a business owner who earns income in 2026-27. The short version: the financial year is when you earn; the assessment year (old law) was when you were assessed; the tax year (new law) is simply the year you earn, used for everything.

FY vs AY vs tax year

Point	Financial year	Assessment year (1961 Act)	Tax year (2025 Act)
Period	1 Apr – 31 Mar	The year after the FY	1 Apr – 31 Mar (shorter in the first year of a new business)
Used for	Accounts, GST, company law, budget	Assessing income of the previous year	Charging and assessing income of that same year
Example	FY 2026-27	Would have been AY 2027-28	Tax year 2026-27
Still in use?	Yes	Only for years before 1 Apr 2026	From 1 Apr 2026 onwards
Where you see it	Balance sheet, GSTR-9	ITR forms and notices for old years	ITR, advance tax, TDS from 2026-27

Period

Financial year

1 Apr – 31 Mar

Assessment year (1961 Act)

The year after the FY

Tax year (2025 Act)

1 Apr – 31 Mar (shorter in the first year of a new business)

Used for

Financial year

Accounts, GST, company law, budget

Assessment year (1961 Act)

Assessing income of the previous year

Tax year (2025 Act)

Charging and assessing income of that same year

Example

Financial year

FY 2026-27

Assessment year (1961 Act)

Would have been AY 2027-28

Tax year (2025 Act)

Tax year 2026-27

Still in use?

Financial year

Yes

Assessment year (1961 Act)

Only for years before 1 Apr 2026

Tax year (2025 Act)

From 1 Apr 2026 onwards

Where you see it

Financial year

Balance sheet, GSTR-9

Assessment year (1961 Act)

ITR forms and notices for old years

Tax year (2025 Act)

ITR, advance tax, TDS from 2026-27

How GST uses the financial year

GST has never used an assessment year. Everything under GST is tied to the tax period (a month or a quarter) and the financial year in which supplies were made. The annual return in Form GSTR-9 and, for larger taxpayers, the reconciliation statement in GSTR-9C are filed for each financial year, due 31 December after the financial year. So GSTR-9 for FY 2025-26 is due by 31 December 2026.

The financial year also drives a deadline many small businesses miss: input tax credit. Under section 16(4) of the CGST Act, you can't claim ITC on an invoice of a financial year after 30 November following the end of that year, or after you file the annual return, whichever is earlier. An invoice dated March 2026 that the supplier uploads late must be claimed by 30 November 2026. Credit notes, amendments to the previous year's invoices and some reversals follow the same cut-off, which is why accountants push to finish GST reconciliations for the last year by the September return. See our GSTR-9 guide for the annual return.

The company and LLP financial year

Company law sets its own rule. Section 2(41) of the Companies Act, 2013 defines a company's financial year as the period ending on 31 March every year. There is one practical twist for new companies: if a company is incorporated on or after 1 January, its first financial year may end on 31 March of the following year. A company incorporated on 15 February 2026 can make its first financial statements for the period 15 February 2026 to 31 March 2027 — about 13½ months — instead of a six-week stub to 31 March 2026.

A different financial year is allowed only in a narrow case. A company that is a holding company, subsidiary or associate of a company incorporated outside India, and needs a different year for consolidation abroad, can apply to the Central Government, which may allow any period as its financial year. Everyone else must use April–March.

The company's financial year then sets the corporate calendar. The annual general meeting must be held within six months of the year end (30 September); first AGM within nine months, and the adopted financial statements must be filed with the Registrar within 30 days of the AGM. LLPs file their annual return (Form 11) by 30 May and their statement of accounts and solvency (Form 8) by 30 October following the year end.

Worked examples: picking the right year

A new proprietorship. Neha, a salaried designer in Pune, quits her job and opens a boutique on 15 September 2026. Her salary from April to mid-September and her boutique profits from 15 September 2026 to 31 March 2027 together make up her total income for tax year 2026-27; the boutique's own tax year is the shorter period from its start date. If she has no tax audit, her return for tax year 2026-27 is due by 31 August 2027. Her return for the previous year — salary from April 2025 to March 2026 — was filed in July 2026 under the 1961 Act and correctly said AY 2026-27. If she registers for GST in October 2026, her first GSTR-9, for FY 2026-27, is due by 31 December 2027.

A company incorporated in February. Raghav and Sunita incorporate a private limited company on 10 February 2026 and choose, under section 2(41), a first financial year running to 31 March 2027. That choice does not apply to income tax. For tax purposes the company's first period is 10 February to 31 March 2026 — the previous year 2025-26 under the 1961 Act — and it must file a return for AY 2026-27 by 31 October 2026 (companies always file by the audit-case date). Its next return covers tax year 2026-27. The company will need a separate income-tax computation for the six-week stub, carved out of its first statutory accounts.

A bank asking for "last three years' ITRs". In October 2026, these are the returns for AY 2026-27, AY 2025-26 and AY 2024-25 — income of FY 2025-26, 2024-25 and 2023-24. From 2027 the most recent will say tax year 2026-27. If a lender's checklist mixes labels, send a covering note listing the income period for each return.

Due-date calendar for 2026-27

The calendar below covers the main income-tax, GST and company dates falling between April 2026 and March 2027, and the first returns under the new Act in 2027. Monthly items recur: TDS deposits are due by the 7th of the next month (30 April for March deductions), GSTR-1 by the 11th of the next month for monthly filers, and GSTR-3B by the 20th of the next month. Advance tax instalments for tax year 2026-27 fall on 15 June, 15 September, 15 December and 15 March, cumulatively 15%, 45%, 75% and 100% of the year's estimated tax.

Two changes from the Finance Act, 2026 matter for small businesses. First, businesses and professionals who are not liable to tax audit — including presumptive-tax filers — now have until 31 August instead of 31 July; this applied from AY 2026-27 under the 1961 Act and continues for tax year 2026-27 under the 2025 Act. Second, a revised return can now be filed up to twelve months from the end of the tax year (31 March), though revising after nine months attracts a fee of ₹1,000 if total income is up to ₹5 lakh, otherwise ₹5,000. The belated-return deadline remains nine months from the end of the tax year (31 December).

Key dates, April 2026 – March 2027 (and the first 2027 returns)

15 Jun 2026

Advance tax, 1st instalment (tax year 2026-27)

31 Jul 2026

ITR for AY 2026-27 — individuals without business income; TDS statement Q1

31 Aug 2026

ITR for AY 2026-27 — non-audit business and professionals

30 Sep 2026

Company AGM deadline (FY 2025-26)

21 Oct 2026

Tax audit report for AY 2026-27 — extended from 30 Sep by CBDT Circular 07/2026

31 Oct 2026

TDS statement Q2; LLP Form 8

21 Nov 2026

ITR for AY 2026-27 — companies and other audit cases, extended from 31 Oct by CBDT Circular 07/2026

30 Nov 2026

Last date to claim GST ITC for FY 2025-26; ITR for transfer-pricing cases

31 Dec 2026

GSTR-9/9C for FY 2025-26; belated return for AY 2026-27

31 Jan 2027

TDS statement Q3

31 Mar 2027

Tax year 2026-27 ends; last date for a revised return for AY 2026-27

31 May 2027

TDS statement Q4 (tax year 2026-27)

31 Jul / 31 Aug / 31 Oct 2027

First ITRs under the 2025 Act for tax year 2026-27

Common mistakes with FY, AY and tax year

Picking the wrong year on a tax challan. Self-assessment tax for income of FY 2025-26 paid in 2026 goes against AY 2026-27; advance tax paid during 2026-27 goes against tax year 2026-27. A wrong year means the credit doesn't appear in your return and you get a demand notice. The fix is a challan correction request through your bank or the e-filing portal, which takes time, so check the year before you pay.

Assuming the new Act applies to last year's income. Returns, notices, revisions and appeals for any year up to AY 2026-27 run under the 1961 Act, with its section numbers and forms. Quoting a 2025-Act section in a reply about an old year confuses everyone.

Mixing up the company's statutory year with the tax year. As the February-incorporation example shows, a long first financial year under company law still needs a separate tax return for the stub period. Forgetting GST cut-offs that follow the financial year. ITC for the previous year lapses after 30 November; plan your reconciliation for the September return. Using calendar years in contracts. If an agreement says "annual turnover" or "within the year", define whether it means the financial year or the calendar year — disputes over bonus, rent escalation and turnover-linked fees often start here.

Official links

• Income-tax Act, 2025 — objective and scope (e-filing help)Tax year, transition and section 536
• Income Tax e-filing portalFile returns, pay tax, see the e-filing calendar
• Finance Bill 2026 — MemorandumReturn due dates and revised return changes
• Companies Act, 2013 (India Code)Section 2(41) financial year; s.96 AGM
• GST portalGSTR-9 and returns by financial year

What to do next

Put the next twelve months' dates into your calendar now — especially advance tax and the 30 November ITC cut-off — and label every tax file by both its income period and its year label (AY for old years, tax year from 2026-27). If you deduct TDS, check that your software has moved to the new forms with our TDS guide and TDS calculator. Setting up a new company? Read our private limited company registration guide before you pick your first financial year end.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the financial year in India?

The financial year (FY) in India runs from 1 April to 31 March of the next year. FY 2026-27, for example, began on 1 April 2026 and ends on 31 March 2027. Income tax, GST, company accounts and the government's own budget all use this April–March year, so a business closes its books, files annual returns and pays advance tax on this cycle.

What is the assessment year?

Under the Income-tax Act, 1961, the assessment year (AY) was the year after the financial year in which income was earned — the year in which that income was assessed and the return filed. Income of FY 2025-26 belongs to AY 2026-27. The Income-tax Act, 2025, in force from 1 April 2026, dropped the term; income from FY 2026-27 onwards is simply 'tax year 2026-27'.

What is the 'tax year' under the Income-tax Act 2025?

Section 3 of the Income-tax Act, 2025 defines the tax year as the twelve-month financial year beginning 1 April. If a business or a new source of income starts during the year, its tax year runs from the start date to 31 March. The tax year replaces both 'previous year' and 'assessment year'; tax year 2026-27 corresponds to what would have been previous year 2026-27 and AY 2027-28.

Which assessment year should I choose when filing my return in 2026?

Returns filed during 2026 for income earned between 1 April 2025 and 31 March 2026 are still filed under the 1961 Act, so you select AY 2026-27. From 2027, returns for income earned in FY 2026-27 are filed under the 2025 Act and refer to tax year 2026-27, not an assessment year.

Can a company choose a financial year other than April–March?

Generally no. Section 2(41) of the Companies Act, 2013 fixes the financial year as ending on 31 March. Only a company that is a holding company, subsidiary or associate of a foreign company and must follow a different year for consolidation abroad can apply to the Central Government for a different period. Even then, income tax is still computed on the April–March tax year.

What is the last date to file ITR for tax year 2026-27?

Under section 263 of the Income-tax Act, 2025 as amended by the Finance Act, 2026: 31 July 2027 for individuals without business income, 31 August 2027 for businesses and professionals not liable to audit, 31 October 2027 for companies and audit cases, and 30 November 2027 where a transfer-pricing report is required.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.CBDT Circular No. 07/2026 (28 September 2026) — extension of due dates for tax audit reports and ITRs, AY 2026-27 — Central Board of Direct Taxes · accessed 9 October 2026
2. 2.Objective and scope of the new Act (Income-tax Act, 2025) — e-filing help — Income Tax Department · accessed 9 October 2026
3. 3.Finance Bill 2026 — Memorandum explaining provisions (direct taxes) — Ministry of Finance (India Budget) · accessed 9 October 2026
4. 4.The Finance Bill, 2026 (as introduced) — Ministry of Finance (India Budget) · accessed 9 October 2026
5. 5.Form 138 — FAQs (Income-tax Rules, 2026) — Income Tax Department · accessed 9 October 2026
6. 6.The Companies Act, 2013 (India Code) — Legislative Department, Government of India · accessed 9 October 2026
7. 7.General Clauses Act, 1897 — section 3 — Legal Authority (bare act) · accessed 9 October 2026
8. 8.India Income Tax Compliance Calendar — September 2026 — India Briefing (Dezan Shira & Associates) · accessed 9 October 2026
9. 9.TDS return filing Q1 FY 2026-27: new Forms 138/140/143 — Computax · accessed 9 October 2026