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CA Intermediate · Taxation · Basic Concepts

Mr. Raghav Menon, a resident individual, runs a business in Kochi. For the tax year 2026-27 he earns business profits during the period 1 April 2026 to 31 March 2027. Under the Income-tax Act, 2025, which of the following correctly describes the 'tax year' for his income?

The tax year is the twelve-month period from 1 April to 31 March. Mr. Raghav's income earned between 1 April 2026 and 31 March 2027 belongs to tax year 2026-27, and no separate assessment year exists under the Income-tax Act, 2025.

  1. AThe twelve-month period beginning on 1 April and ending on 31 March, which is the tax year 2026-27 for income earned in itCorrect
  2. BThe twelve months ending 31 March 2027, but called the assessment year 2027-28
  3. CThe calendar year 2026, ending 31 December 2026
  4. DA period of his choice of twelve months chosen at the time of filing return

Explanation

Under the Income-tax Act, 2025 the tax year is the twelve-month period starting 1 April and ending 31 March. Income earned in it is assessed for that same tax year, so the earlier concept of previous year/assessment year is replaced. Option B uses the old assessment year term, so it is wrong.

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