## Previous Year (P.Y.) and Assessment Year (A.Y.)
### Core Definitions
| Term | Meaning |
|---|---|
| Assessment Year (A.Y.) | The year in which tax is paid / return is filed. A 12-month period from 1st April to 31st March. |
| Previous Year (P.Y.) | The year in which income is earned. It is the year immediately preceding the A.Y. Generally a 12-month period (1st April to 31st March). |
### Special Rule for a New Business / New Source of Income
When a business or source of income is newly set up during a financial year, the P.Y. is NOT a full 12 months. It runs from the date of setting up of the new business/source up to 31st March of that year.
### As per Finance Act, 2025
- Relevant P.Y. = 2025-26 (income earning year)
- Relevant A.Y. = 2026-27 (tax payment year)
### General Rule of Taxability
> Income of the Previous Year is taxable/assessable in the Assessment Year.
### Exceptions: Income of P.Y. Taxable in the P.Y. Itself
In the following situations, tax is charged in the same year in which income arises (to safeguard revenue):
1. Income of casual shipping business of a Non-Resident.
2. Income of a person leaving India permanently or for a long duration.
3. Income of a discontinued business.
4. Income of a person trying to transfer assets for tax avoidance.
5. AOP/BOI/AJP formed for a particular purpose with a short duration.