What is a "tax year", and what happened to the previous year and assessment year?

Old terms and the new one

Under the 1961 Act, people often mixed up the two years: a return "for AY 2026-27" was about income of FY 2025-26. Under the 2025 Act there is only one year to name, and it is the year the income was earned.

A business or income source that starts mid-year

If you set up a new business or profession, or a new source of income comes into existence, during a financial year, the first tax year runs from that date to 31 March of the same financial year. For example, a business started on 1 October 2026 has a first tax year from 1 October 2026 to 31 March 2027. After that, every tax year is a normal April-to-March year.

What it means in practice

• Returns: the return for tax year 2026-27 is filed in 2027, after the year ends, just as returns were filed in the assessment year before. Due dates are set in the Act and may be changed by notification.
• Advance tax for tax year 2026-27 is paid during that year, in the usual instalments.
• TDS certificates, Form 168 (which replaces Form 26AS and the AIS) and challans refer to the tax year.
• Older years keep the old terms. Notices, assessments, appeals and updated returns for FY 2025-26 and earlier refer to the assessment year and quote 1961 Act sections. Read each notice against the right Act.

A simple rule

When someone says "AY 2027-28", they mean income of FY 2026-27, which under the new Act is tax year 2026-27. Our old and new section finder lists the matching sections and forms.