# When is income of the Previous Year taxable in the PY itself?
## The general rule
Income of a previous year (PY) is assessed in the assessment year (AY) following the previous year.
Example: Income earned in PY 2025-26 is assessed in AY 2026-27.
## Five exceptions — income of PY taxed in PY itself
The Act recognises 5 situations where the Assessing Officer may tax income in the previous year itself, without waiting for the AY:
| # | Situation | Underlying concern |
|---|---|---|
| 1 | Shipping business of non-resident | Ship may leave India and revenue may escape |
| 2 | Persons leaving India | Person may not return and tax cannot be recovered later |
| 3 | AOP / BOI / AJP formed for a particular event or purpose | Entity will be dissolved soon |
| 4 | Persons likely to transfer property to avoid tax | Risk of tax evasion through alienation of assets |
| 5 | Discontinued business | Source of income ceases mid-year |
## 1. Non-Resident Shipping Business
When a ship owned/chartered by a non-resident carrying livestock, mail or goods leaves India during the PY, it is allowed to leave India only when tax is paid by it. Tax is collected in the current PY itself.
## 2. Persons Leaving India
If it appears to the AO that an individual:
- May leave India during the PY (or shortly after the expiry of PY), AND
- Has no plans of returning to India,
Then tax may be recovered from him in the current year itself.
## 3. AOP / BOI / AJP formed for a particular purpose
If an AOP/BOI/AJP is:
- Formed for a particular event or purpose, AND
- Likely to be dissolved in the same year,
Then the AO can recover tax on income up to the date of dissolution in the current year itself.
## 4. Persons likely to transfer property to avoid tax
If, during the current PY, it appears to the AO that a person is likely to sell / transfer / dispose off any of his assets to avoid payment of tax, the AO can recover tax on such transferred assets along with his income during the current year.
## 5. Discontinued business
Where any business or profession is discontinued in any year, the AO may recover tax on such discontinued business in the current year itself.