The tax year is the 12-month period from 1 April to 31 March for which income is taxed under the Income-tax Act 2025, in force since 1 April 2026. It replaces the old twin concepts of previous year and assessment year with a single term, so the year you earn income and the year it is labelled for tax are now the same.
Under the 1961 Act you earned income in a previous year and were assessed in the following assessment year, which meant every form, challan and notice carried a confusing AY label one year ahead of the financial year. The 2025 Act drops this. Income earned between 1 April 2026 and 31 March 2027 simply belongs to tax year 2026-27, and your return, tax payments and notices all reference that same year.
For a business owner, nothing changes in the books — your accounting year is still April to March. What changes is paperwork: when filing for FY 2026-27, select tax year 2026-27 rather than hunting for AY 2027-28. Check challans carefully after paying advance tax or self-assessment tax, because paying against the wrong year label is the classic error that triggers mismatch notices.
One edge case matters. Proceedings that started before 1 April 2026 — an old scrutiny, a pending appeal, a reassessment for an earlier year — continue under the 1961 Act with its old section numbers and AY terminology. So you may legitimately receive correspondence in both formats for a while. Do not assume an AY-labelled notice is fake; check which Act it cites.
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More Income tax terms
Reviewed to the law in force in FY 2026-27. General information, not advice — confirm the position for your facts before acting.