Tax year, assessment year, previous year: which one your notice or challan means

Short answer: the 2025 Act replaces "previous year" and "assessment year" with a single "tax year" (Section 3) — the year the income is actually earned. Nothing about your rates, deductions or filing dates changes. The one real complication is FY 2026-27, when AY 2026-27 and TY 2026-27 are both live.

Most people arrive at this question holding something that states a year — an intimation, a demand, a challan screen asking which Act and which year to pay under. The label on that document decides which twelve months of income is in issue, and for FY 2026-27 the two systems name the same period differently. The overlap and the challan trap are below; if the document in your hand is a notice rather than a challan, start instead with what a 143(1) intimation means or the time limits on a reassessment notice.

The old system, and why it confused people

The 1961 Act named two years for every piece of income:

• Previous year — the financial year in which the income was earned
• Assessment year — the following financial year, in which it was assessed and taxed

So salary earned between 1 April 2025 and 31 March 2026 belonged to previous year 2025-26 and was filed for assessment year 2026-27. Two labels, twelve months apart, for one set of income.

Every rate, threshold, due date and notice then had to specify which of the two it meant. Most practical errors came from the gap: a challan paid for the wrong year, a rate applied from the wrong column, a deadline read off the wrong row.

The new system

Section 3 of the 2025 Act keeps one label. The tax year is the financial year in which the income arises — the old previous year, under a clearer name — and the assessment year concept is gone.

Income earned from 1 April 2026 to 31 March 2027 is simply tax year 2026-27. You still file after the year ends; the return is just labelled with the year the income belongs to rather than the year after it.

The timeline, side by side

Read the middle two rows together and the overlap becomes obvious. AY 2026-27 and tax year 2026-27 carry the same digits and refer to completely different income.

⚠️ The overlap year, and the challan trap

Through FY 2026-27, both are live on the e-filing portal at once:

• AY 2026-27 — income of FY 2025-26, under the 1961 Act, on the old ITR forms
• Tax year 2026-27 — income from 1 April 2026, under the 2025 Act

When paying tax you must select the right one. A challan tagged to the wrong year does not bounce. It sits against the wrong demand, leaves the intended demand outstanding, and quietly accrues interest and recovery follow-up until someone reconciles it. Because the two share the same digits, this is easy to get wrong and tedious to unwind.

The safe habit for this year: say which Act you mean, not just the year. "AY 2026-27 under the 1961 Act" and "tax year 2026-27 under the 2025 Act" are unambiguous in a way that "2026-27" is not.

What has not changed

• Rates and slabs — untouched by the 2025 Act and by the Finance Act 2026
• Deductions — same reliefs, renumbered
• The financial year itself — still 1 April to 31 March
• When you file — still after the year ends
• Old years — governed by the 1961 Act and its terminology, whenever you file them

The 2025 Act was a re-codification, not a policy change. If your working was right before, it is right now with the labels updated.

Where to go next

For which Act governs your current return, see does the Income Tax Act 2025 change your FY 2025-26 return?. For the sections themselves, the old-to-new mapping is the quick reference. If you are holding a notice and the year on it does not look right, income tax notices under the new Act explains how to read it.

This is a working reference, not the statute. For anything you are filing or relying on, confirm the position against the Act or the department's official 1961-vs-2025 comparison utility.