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CA Intermediate · Taxation · Basic Concepts

Mr. Tarun Bhatia, an individual, has a business with a financial year ending 31 March. He commenced a new business on 1 November 2026. Further, he is a non-resident who had no income earlier. Consider these statements about his tax year for the new business under the Income-tax Act, 2025: (A) the first tax year for the new business is 1 November 2026 to 31 March 2027, being the period from setting up to the end of the tax year; (B) he can choose a different twelve-month tax year for the business to end on 30 September. Which is correct?

Only statement A is correct. For a business started on 1 November 2026, the first tax year runs from that date to 31 March 2027. The tax year is fixed by law from 1 April to 31 March, so the assessee cannot choose a different year-end such as 30 September.

  1. AOnly A is correctCorrect
  2. BOnly B is correct
  3. CBoth A and B are correct
  4. DNeither A nor B is correct

Explanation

For a newly set up business, the tax year runs from the date of setting up to 31 March of that year, so the first tax year is 1 November 2026 to 31 March 2027. The tax year is uniform and fixed as 1 April to 31 March, so an assessee cannot choose a different period such as ending 30 September. Hence only A is correct.

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