The Income-tax law has two important terms: (i) Previous year and (ii) Assessment year. It is extremely important for determining taxpayer's income and tax payable amount.
(i) Previous year: Previous year is the year in which the income is earned which typically starts from 1st April and ends on 31st March. Whereas, the year immediately following the previous year (1st April to 31st March) is known as ‘Assessment Year’.
For example, the current previous year is 1st April 2022 to 31st March 2023, i.e. FY 2022-23. The corresponding assessment year is 1st April 2023 to 31st March 2024, i.e. AY 2024-25.