# Assessment Year and Previous Year
## Assessment Year [Sec 2(9)]
- A period of 12 months commencing on 1st April every year.
- Always starts on 1st April and ends on 31st March.
- Income is earned in the Previous Year and assessed/taxed in the Assessment Year.
## Previous Year [Sec 3]
- The financial year immediately preceding the Assessment Year.
- Can be a period of 12 months or less (in the year a business is newly set up).
- For new business: PY starts from the date of setup and ends on 31st March of that financial year.
## Relationship
| Income Earned in | Previous Year | Assessment Year |
|---|---|---|
| 2025–26 | PY 2025–26 | AY 2026–27 |
## Finance Act Application
- A Finance Bill is presented on 1st February each year.
- The Finance Act applies from 1st April of that year.
- Finance Act 2025 applies to PY 2025–26 / AY 2026–27 and is examinable in May 26, Sep 26, Jan 27 exams.