Separating the assessment and the financial year There is a need for the individual to separate the financial year and the assessment year when they are dealing with their tax workings. This is important in the sense that it will enable a proper analysis of what has been happening in a specific financial year and distinguish details of the exact time period to which a specific activity relates. Previous year The first term that an individual tax payer should deal with is the previous year. This is simple in the sense that it will match with the normal concept of a financial year that an individual has. Thus for a person the financial year in which any income arises is the previous year as far as the tax workings are concerned. This stretches from April of one year to the March of the next year so it will match with the period that they normally adopt for accounting purposes. This makes it simple to understand. For example in the current situation for the income for the current year the previous year is 2013-14 which stretches from April 2013 to March 2014. Assessment year This is a bit tricky for the individual because the assessment year is always a year that is ahead of the previous year. The confusion arises because accountants and other tax related people often refer to the assessment year and not any other period. Thus when it comes to simple understanding the individual always has to know that the assessment year is one year after the previous year. In the current scenario when the previous year is 2013-14 then the assessment year is 2014-15. For the period just gone by the assessment year was 2013-14 for which the people have been filing their tax returns and hence this is something that they always need to keep in mind. The clear distinction between the previous and the assessment year can save a lot of problems for people at a later stage. Tax changes One of the main areas where there has to be a careful look at the year figure is when there are changes in the tax laws. This creates an element of confusion due to the fact that there is a change mentioned that will go into effect from a certain time period but then it is not clear when this will actually be effected. For many areas the change is actually mentioned in terms of the assessment year and hence it is said that this will be applicable from 2014-15. This can seem as if the change will come into effect from the next financial year but in reality this is actually the assessment year that is being talked about. This means that the change is actually coming about in the current financial year and from the 1st of April this will already be implemented. IF this is missed out then there could be a problem because rectifying the mistake at a later date would not be possible. Some of the changes require immediate action in terms of compliance and other details and hence if this is missed out then there can be penalties that would have to be paid. This is the reason why the individual must take a careful look at the conditions and then see the exact time period when this would come into effect.
Posted on: Thu, 26 Sep 2013 03:45:48 +0000
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