Assessment year in simple terms means the financial year immediately succeeding the previous year. In other words it is the year in which one is assessed for his/ her income.   

Below mentioned example will help you gain more clarity on these terms:

• Mr. B, a salaried individual earned an income of Rs. 3, 50,000/- in the previous year starting from 1^st April’ 2009 to 31^st March’ 2010 (i.e. 2009-10). Now he has to pay tax on income earned, at applicable rates for assessment year starting from 1^st April’ 2010 to 31^st March’ 2011 (i.e. 2010-11).

However there are certain exceptions to the above Rule, those being:

1. Income of a Non-resident from Shipping.

2. Income of persons leaving India either permanently or for a long period of time.

3. Income of Bodies formed for a short duration says for a particular event or purpose.

4.  Income of a person trying to either Charge, Sell, Transfer or Dispose of or otherwise part with any assets with a view to avoid any tax liability.

5. Income earned from a discontinued business.

PLEASE NOTE:

• Previous year and Assessment year will always be starting from 1^st April and ending on 31^st March, In no case it can be followed as a Calendar year i.e. 1^st January to 31^st December.