# Income Assessed in the Same Previous Year (Exceptions to the Normal Rule)

## The normal rule vs. the exceptions

Under income tax, the general rule is that income of a previous year (PY) is taxed in the immediately following assessment year (AY). However, in certain situations the law allows the income to be taxed in the same previous year itself, so that revenue is not lost when a person or activity is about to disappear.

## The five situations

Section	Situation	Income taxed	Trigger
174	Individual leaving India with no intention to return	Income of the PY itself	Applies only if the Assessing Officer (A.O.) decides
174A	AOP / BOI formed for a specific event or purpose, likely to dissolve in the same/next year	Income up to the date of dissolution	Applied at the inception by A.O.
175	A person likely to transfer property to avoid tax	Income from the beginning of the year till A.O. commences proceedings	When it appears to the A.O.
176	Discontinued business during the PY	Income up to the date of closure	At the discretion of the A.O.

## Memory hook

Think "L-E-T-D" — Leaving India (174), Event-based AOP/BOI (174A), Transfer to avoid tax (175), Discontinued business (176). All four are accelerated taxation to protect revenue.

## Why it matters

In each case the taxpayer is on the verge of becoming unreachable (leaving the country, dissolving, transferring assets, or shutting down). Taxing in the same year prevents escapement of income.

Worked example

### Example 1

Example (Section 174 – leaving India): Mr. A, a foreign consultant, finishes his project in November of PY 2025-26 and intends to permanently leave India in December with no intention to return. The A.O. may invoke Section 174 and assess the income earned during PY 2025-26 in that same year rather than waiting for AY 2026-27.

### Example 2

Example (Section 176 – discontinued business): A sole proprietor shuts down his trading business on 30 September 2025. Under Section 176, the A.O. has the discretion to assess the income earned from 1 April 2025 to 30 September 2025 in the same previous year rather than the following AY.

⚠️ Common exam mistakes

Assuming all five sections are automatic — Section 174 applies only if the A.O. decides, and Section 176 is at the A.O.'s discretion.
Confusing the period of income taxed: Section 175 taxes income up to the date proceedings commence, while 174A/176 tax income up to the date of dissolution/closure.
Mixing these accelerated-assessment provisions with the 'Undisclosed Sources of Income' (Sec 68–69D) — they appear nearby in notes but are entirely different concepts.

Reference: Sections 174, 174A, 175, 176 — Income-tax Act, 1961

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Assessment of income in the same previous year (Sections 172–176)

Worked example

⚠️ Common exam mistakes