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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Under the Indian income tax framework, the 'previous year' for assessing the income of a person who has been earning income throughout is generally which period?

The previous year is the financial year immediately before the assessment year. Income earned from 1 April to 31 March is assessed in the following assessment year, so the preceding financial year is the correct answer, not a calendar year or freely chosen period.

  1. AThe financial year immediately preceding the assessment yearCorrect
  2. BThe calendar year in which the income is received
  3. CThe financial year following the assessment year
  4. DAny twelve-month period chosen by the taxpayer

Explanation

Income earned in a financial year (1 April to 31 March) is taxed in the next assessment year. That financial year is the previous year. Hence the year immediately preceding the assessment year is correct; a calendar year or a freely chosen period is not the rule for general taxpayers.

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