Fiscal Year is referred to as the period of one year that governments and organizations make use for financial budgeting and reporting. The concept of FY is mostly utilized for Accounting purposes for the preparation of financial statements.
While a typical fiscal year is expected to start on 1st January and end on 31st December every year, still not every fiscal year will correspond to the respective calendar year. For instance, colleges and universities usually commence and end the fiscal year as per the respective school year.
The Income statement and Balance Sheet of organizations across the world are typically prepared for the period of one year. However, the period or the date from which it will commence will vary from one country to another.
In India, the particular period commences from 1st April and closes on 31st May every year.
The period during which there is an earning of some income, it is referred to as the Financial Year. During this period, Income Tax Returns get filed. Moreover, Taxes for the given company also get paid the upcoming year once the Fiscal Year ends. The next year during which income assessment takes place for taxation purposes is referred to as the Assessment Year.
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For instance, if the accounts are getting prepared for the year that commences on 1st April 2020, and ends on 31st December 2021, the period is referred to as the Fiscal Year for 2020-2021. The given income will be assessed for taxation during the next year. The given period will be referred to as the Assessment Year 2020-2021.
The date which is due for filing returns for income tax for the particular financial year turns out to be 31st July or 30th September of the respective Assessment Year. Therefore, in case the returns for income tax are filed for the financial year 2020-2021, then the respective due date for income tax returns filing will be 31st July or 30th September 2021.
Fiscal Year turns out to be the period of time that lasts one year. However, it is not necessary to commence at the start of the calendar year. Organizations, companies, and nations can commence as well as end the respective fiscal years differently. It would depend on the external auditing and accounting practices.
For organizations operating on a seasonal Basis, using the concept of the Fiscal Year can be significant. This is because it helps in providing a highly accurate reflection of the operations of the company. It allows for expenses and revenues for better alignment.