What Is a Financial Year in India? A Complete Guide (2026-27)
A financial year (FY) in India runs from 1 April to 31 March of the following calendar year. The current financial year is FY 2026-27, from 1 April 2026 to 31 March 2027. Under the Income-tax Act, 2025, which came into force on 1 April 2026, this period is also called Tax Year 2026-27.
The previous year, FY 2025-26, is still filed under the old law as assessment year (AY) 2026-27. The ITR deadline for that income was 31 July 2026 for most individuals, and it has passed. If you haven’t filed yet, you can still file a belated return until 31 December 2026.
Quick answer: FY 2026-27 = 1 April 2026 to 31 March 2027 = Tax Year 2026-27. Income earned in FY 2025-26 is filed under AY 2026-27; for income earned from 1 April 2026, there is no separate assessment year.
What Does “Financial Year” Mean?
The financial year is the 12-month accounting period from 1 April of one year to 31 March of the next. It is the period during which income is earned, recorded, and attributed for tax purposes.
The purpose is standardization. Businesses, employers and government departments in India report income, expenses and financial performance against the same April-to-March clock. That makes comparisons consistent and gives the tax system a fixed window to process returns after the earning period closes.
For HR leaders, the financial year governs when salary increments take effect, when appraisal cycles close, when payroll compliance resets, and when workforce budgets are approved and spent.
It is the backbone of how organizations plan headcount, compensation, and HR spending.
When Does the Financial Year Start and End in India?
India’s financial year always starts on 1 April and ends on 31 March of the following year.
The April-to-March structure dates back to colonial-era administration and was retained after independence. It is the standard for income tax and, under the Companies Act, 2013, for company accounts.
The year divides into four quarters:
| Quarter | Dates |
| Q1 | 1 April to 30 June |
| Q2 | 1 July to 30 September |
| Q3 | 1 October to 31 December |
| Q4 | 1 January to 31 March |
Listed companies report quarterly results against these quarters. HR teams typically use Q1 to roll out increments and finalise the previous year’s appraisal outcomes, while Q4 is the crunch period for using training budgets, completing compliance filings and freezing next year’s headcount plan.
A small number of companies, mainly Indian subsidiaries of foreign groups, may follow a different accounting year with approval under the Companies Act. For income tax, however, everyone is assessed on the April-to-March year.
Financial Year vs Assessment Year vs Tax Year
This is the question that trips up most first-time ITR filers, and it changed in 2026.
Up to FY 2025-26 (Income-tax Act, 1961): the financial year (called the “previous year” in the law) is when you earn income. The assessment year is the following year, when that income is assessed and the return is filed. So AY = FY + 1: income from FY 2025-26 is filed under AY 2026-27.
From FY 2026-27 (Income-tax Act, 2025): the new Act replaces “previous year” and “assessment year” with a single tax year, which is the same as the financial year.
Income earned from 1 April 2026 to 31 March 2027 belongs to Tax Year 2026-27, and the return for it will also refer to Tax Year 2026-27. The return is still filed after the year ends; only the label changes.
| Income earned | Financial year | Year to select when filing | Law |
| 1 Apr 2022 – 31 Mar 2023 | FY 2022-23 | AY 2023-24 | Income-tax Act, 1961 |
| 1 Apr 2023 – 31 Mar 2024 | FY 2023-24 | AY 2024-25 | Income-tax Act, 1961 |
| 1 Apr 2024 – 31 Mar 2025 | FY 2024-25 | AY 2025-26 | Income-tax Act, 1961 |
| 1 Apr 2025 – 31 Mar 2026 | FY 2025-26 | AY 2026-27 (belated filing open until 31 Dec 2026) | Income-tax Act, 1961 |
| 1 Apr 2026 – 31 Mar 2027 | FY 2026-27 (current) | Tax Year 2026-27 | Income-tax Act, 2025 |
Which Year Do I Select When Filing or Paying Tax?
- Filing a return for income earned between 1 April 2025 and 31 March 2026: select AY 2026-27.
- Paying advance tax for income you are earning now (April 2026 to March 2027): select Tax Year 2026-27.
- Filing next year for FY 2026-27 income: select Tax Year 2026-27. There is no “AY 2027-28”.
Why Is Income Taxed After the Year Ends?
Income can be calculated only once the earning period is over. A bonus paid in March, a mid-year job change that splits income across two employers, capital gains in the last quarter or business income that changes until year-end all settle only after 31 March.
That is why returns are filed in the months after the financial year closes, whether the law calls it the assessment year (old Act) or keeps the same tax-year label (new Act).
Key Tax Dates for FY 2026-27
A quick-reference calendar for individuals and businesses, as of 29 October 2026.
| Date | Event | Status |
| 1 April 2026 | FY 2026-27 (Tax Year 2026-27) begins; Income-tax Act, 2025 comes into force | Passed |
| 15 June 2026 | First advance tax instalment for Tax Year 2026-27 (15% of estimated tax) | Passed |
| 31 July 2026 | ITR due date for AY 2026-27 (FY 2025-26 income) for individuals not requiring audit (ITR-1, ITR-2) | Passed |
| 31 August 2026 | ITR due date for AY 2026-27 for non-audit business and professional cases (ITR-3, ITR-4) | Passed |
| 15 September 2026 | Second advance tax instalment (45% cumulative) | Passed |
| 21 November 2026 | ITR due date for AY 2026-27 for audit cases and companies (extended from 31 October 2026) | Upcoming |
| 15 December 2026 | Third advance tax instalment (75% cumulative) | Upcoming |
| 31 December 2026 | Last date for a belated return for AY 2026-27 | Upcoming |
| 15 March 2027 | Final advance tax instalment (100%) | Upcoming |
| 31 March 2027 | FY 2026-27 ends; last date to revise an AY 2026-27 return | Upcoming |
Missed the 31 July 2026 Deadline?
You can still file your return for FY 2025-26 income. Here’s what applies:
- File a belated return by 31 December 2026. Log in to the income tax e-filing portal, select AY 2026-27 and choose “Belated return u/s 139(4)” as the filing type. The window closes earlier if the Department completes your assessment first.
- Late filing fee (Section 234F): ₹5,000, or ₹1,000 if your total income is up to ₹5 lakh. No fee applies if you weren’t required to file and are filing voluntarily.
- Interest on unpaid tax (Section 234A): 1% per month or part of a month on any tax still due after TDS and advance tax, from the day after the due date until you file. If your TDS covers your full tax, no 234A interest arises.
- What you lose: a belated return generally can’t carry forward most business and capital losses to later years.
- Need to correct a return you’ve already filed? A revised return for AY 2026-27 can be filed until 31 March 2027.
- Missed 31 December too? You can still file an updated return (ITR-U) within 48 months of the end of the assessment year, so until 31 March 2031 for AY 2026-27. It requires paying additional tax of 25% to 70% of the tax and interest due, depending on how late you file, and it can’t be used to claim a refund. File it through the same e-filing portal, selecting “Updated return u/s 139(8A)”.
If you’re owed a refund, file the belated return before 31 December: an updated return can’t claim one.
HR and Payroll Compliance Calendar for FY 2026-27
For HR and payroll teams, these are the recurring deadlines that follow the financial year. From 1 April 2026, several income tax forms have new numbers under the Income-tax Act, 2025 and Income-tax Rules, 2026.
| When | What | Notes |
| 7th of every month | Deposit TDS deducted from salaries in the previous month | March deductions are due by 30 April 2027 |
| 15th of every month | Deposit PF and ESI contributions for the previous month’s wages | Under the Code on Social Security, 2020 |
| April 2026 | Collect tax-regime choices and investment declarations from employees | New regime applies by default if an employee doesn’t opt for the old one |
| 31 July 2026 (passed) | Q1 salary TDS return in Form 138 (formerly Form 24Q) | April–June 2026 |
| 31 October 2026 (passed) | Q2 salary TDS return in Form 138 | July–September 2026 |
| 30 November 2026 | Pay statutory bonus for FY 2025-26 under the Code on Wages | Due within 8 months of the year end |
| January–February 2027 | Collect proof of investments and HRA claims (Form 124, formerly Form 12BB) | Needed to finalise TDS for the year |
| 31 January 2027 | Q3 salary TDS return in Form 138 | October–December 2026 |
| 31 May 2027 | Q4 salary TDS return in Form 138 | January–March 2027 |
| 15 June 2027 | Issue the annual salary TDS certificate in Form 130 (formerly Form 16) | For Tax Year 2026-27 salaries |
Professional tax and labour welfare fund deadlines vary by state; check the rules for each state where you have employees.
New vs Old Tax Regime: What Resets Each Financial Year
One of the most important choices salaried employees make at the start of each financial year is between the old and new tax regimes.
The new regime has been the default since FY 2023-24: if an employee doesn’t tell their employer they want the old regime, TDS is deducted under the new one. Salaried employees can switch each year; people with business income have more limited switching rights.
- New regime: lower slab rates, a ₹75,000 standard deduction for salaried employees, and no tax on income up to ₹12 lakh after deductions (₹12.75 lakh of salary). Most exemptions and deductions, such as HRA, LTA and Section 80C, aren’t available.
- Old regime: higher slab rates, but allows HRA, LTA, 80C, 80D and other deductions.
Neither is better for everyone; it depends on income, rent, insurance and investments. For payroll teams, the practical point is to collect regime choices before the first payroll run of each financial year, since late declarations cause TDS errors that are painful to fix mid-year. Because post-tax take-home pay drives how offers compare, regime choice also matters for compensation design.
Know more about how tax regime works here.
Why the Financial Year Matters for HR Leaders
The financial year is the structural container for almost every major HR process.
- Budgeting and headcount planning. Workforce plans, hiring targets and HR technology budgets are built around the April-to-March cycle. Budgets are usually approved in Q4 of the outgoing year so hiring can begin in Q1 of the new one. Misaligned timelines cause delayed requisitions and lapsed budgets.
- Payroll and tax compliance. TDS, quarterly returns and annual salary certificates all follow the financial year.
- Performance and compensation cycles. Most large Indian organisations finalise ratings by March, issue increment letters in April and apply revised salaries from 1 April.
- Statutory benefits. PF, ESI, gratuity provisioning and statutory bonus calculations all use the financial year as their base period.
If your HR reporting, offer letters or policy templates still refer to FY 2024-25 as “current”, they are two years out of date and should be refreshed to FY 2026-27.
How to Avoid the Most Common Financial Year Mistakes
- Filing under the wrong year. For FY 2025-26 income, select AY 2026-27. Selecting AY 2025-26 matches your return to the wrong year. Always double-check the year before submitting.
- Using “AY 2027-28” for current income. Under the new Act, FY 2026-27 income is Tax Year 2026-27. Old templates and calculators may still show AY 2027-28.
- Treating the calendar year as the financial year. An employee who joins in October 2026 still has income from October 2026 to March 2027 in FY 2026-27.
- Confusing advance tax with ITR deadlines. Advance tax is paid in instalments during the year; the return is filed after the year ends.
- Using old form numbers. Salary TDS returns for FY 2026-27 are filed in Form 138 (not 24Q), and the annual salary certificate is Form 130 (not Form 16).
- Skipping the regime declaration in April. Without it, payroll defaults to the new regime, which may not suit every employee. Build it into the Q1 checklist.
FAQs
What is the current financial year in India?
The current financial year is FY 2026-27, from 1 April 2026 to 31 March 2027. Under the Income-tax Act, 2025, it is also called Tax Year 2026-27.
What is the difference between financial year and assessment year?
Up to FY 2025-26, the financial year is when you earn income and the assessment year is the following year, when it is assessed: AY = FY + 1. From FY 2026-27, the Income-tax Act, 2025 replaces both with a single “tax year”, the same as the financial year.
Is there an assessment year 2027-28?
No. Income earned in FY 2026-27 falls under the Income-tax Act, 2025 and is referred to as Tax Year 2026-27. The assessment year concept applies only to income earned up to 31 March 2026.
Which year should I select when filing my ITR now?
For income earned between 1 April 2025 and 31 March 2026, select AY 2026-27. For advance tax on income you’re earning now, select Tax Year 2026-27.
What was the ITR filing deadline for AY 2026-27?
31 July 2026 for individuals not requiring audit (ITR-1 and ITR-2), and 31 August 2026 for non-audit business and professional cases. Both have passed. Audit cases and companies have until 21 November 2026.
I missed the ITR deadline. Can I still file?
Yes. You can file a belated return for AY 2026-27 until 31 December 2026, with a late fee of up to ₹5,000 under Section 234F and interest at 1% a month on any unpaid tax under Section 234A. After that, an updated return (ITR-U) is possible with additional tax.
Why does the ITR form ask for the assessment year instead of the financial year?
Under the 1961 Act, returns were filed for the assessment year that followed the year income was earned, because income can be fully calculated only after the year ends. From FY 2026-27, the form will refer to the tax year instead.
Do all companies in India follow the April-March financial year?
Most do, as the Companies Act, 2013 requires an April-March year with limited exceptions, mainly for subsidiaries of foreign companies with approval. For income tax, all taxpayers use the April-March year.
Can India’s financial year change to January-December?
There have been discussions about aligning the financial year with the calendar year, but no change has been made. The Income-tax Act, 2025 kept the April-to-March tax year.
Key Takeaways
- The current financial year is FY 2026-27 (1 April 2026 to 31 March 2027), also called Tax Year 2026-27 under the Income-tax Act, 2025.
- For FY 2025-26 income, select AY 2026-27. For FY 2026-27 income, there is no separate assessment year.
- The 31 July 2026 ITR deadline has passed; belated returns for AY 2026-27 are open until 31 December 2026.
- Payroll forms are renumbered from FY 2026-27: Form 138 for quarterly salary TDS returns and Form 130 for the annual salary certificate.
- The new tax regime is the default; collect employees’ regime choices at the start of each financial year.
- For HR leaders, the financial year drives budgeting, payroll, appraisals and statutory compliance.
This article provides general information and is not tax advice.