Previous year and assessment year
- The financial year in which income is earned is referred to as previous year.
- Sections of 3 of the income tax act define the previous year to means a financial year immediately proceeding the assessment year.
- In case of business or profession newly set up of sources of income newly come in to existence, the previous year shall be the period beginning with the date of setting up with business and profession or the date on which the new sources of income come in to existence and ending with 31st march of said financial year.
- The periods of 12 months commencing on 1st day of April every year is known as assessment year as defined in section 2(9)
- An assessment year is a financial year immediately succeeds the relevant previous year.
Average rate of tax 2(10)
- The rate arrived at by dividing the amount of tax calculated on the total income, by such income.
- This definition becomes relevant in the context of giving rebate u/s 110 in the assessment of member of AOP.