Assessment Year

Definition and Meaning

An Assessment Year is the Financial Year’s following year, where all earnings from that Financial Year will be taken into consideration and assessed along with taxes by the Income Tax Department. In HR and payroll, the assessment year provides a basis on which to calculate, file and verify income tax returns, TDS, and employee tax liability.

HR Significant Points:

• Important for calculating payroll taxes and TDS.
• Utilised by employees to prepare ITR.
• Provides support for HRs for accurate tax reporting, with the creation of accurate Forms 16.
• Has an effect on how salaries are structured and how tax plans are developed.
• Located and tracked within HRMS and Payroll Systems.

Legal Compliance / Policy / Regulation (India) 

An Assessment Year is defined by the Income Tax Act 1961. Employers are required by law to:

• A proper deduction of TDS has to be deposited on behalf of employees during the financial year.
• Provide Form 16 with the relevant assessment year noted.
• Comply with all payroll tax compliance requirements under the Income Tax Act.

Failure to properly report the Assessment Year information can cause discrepancies in tax amounts due to the employee and potentially result in Tax Notices being issued.