The upcoming Income Tax Bill 2025, introduced in Parliament on Feb 13, seeks to simplify India's tax laws and simplify compliance for taxpayers. One of the key changes in the bill is the introduction of the "Tax Year," which replaces both the Financial Year (FY) and the Assessment Year (AY).
What Is A Tax Year As Per The New Income Tax Bill, 2025
As per the Income-Tax Bill, 2025, the Tax Year is defined as follows. “It is a 12-month period that begins on April 1st and ends on March 31st of the following year. If a new source of income arises during the year, the Tax Year for that income begins from the date the income source comes into existence,” says Shefali Mundra, tax expert, ClearTax.
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For a newly established business or profession, the Tax Year starts from the date of the establishment.
Comparison: Tax Year V/S Financial Year V/S Assessment Year
The comparison of the tax year under the new Income Tax Bill, 2025 and the Financial year and Assessment year is as follows:
Impact Of The Change
The removal of the concept of financial year and assessment year simplifies the tax process, giving taxpayers a better overview and less confusion.
Multiple concepts of financial year, previous year, and assessment year often confused taxpayers because of the semantics: this impacted the readability of tax law.
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"A single concept of a tax year is easy to understand and in line with international practice (even though there may not have been any substantive change),” says Gouri Puri, partner, Shardul Amarchand Mangaldas & Co.
“It tends to simplify the operation of the tax authorities additionally by minimizing amounts of disparities and misinterpretations concerning assessment periods and the financial periods,” says Mundra.
