Tax Year Explained in Simple Language (New Income Tax Act, 2025)
A Tax Year is the 12-month period during which your income is calculated for income tax purposes. Under the New Income Tax Act, 2025, the Tax Year starts on 1 April and ends on 31 March of the following year.
For example:
- Tax Year 2026–27: 1 April 2026 to 31 March 2027
All income earned during this period is considered for calculating your income tax liability.
Tax Year for a New Business
If you start a new business during the financial year, your Tax Year begins on the date your business starts instead of 1 April.
Example
- Business commencement: 10 August 2026
- Tax Year: 10 August 2026 to 31 March 2027
From the next year onwards, your Tax Year will follow the normal period of 1 April to 31 March.
Tax Year for a New Source of Income
If you already earn income but start receiving income from a new source during the year, the Tax Year for that income starts from the date the income begins.
Examples of new income sources include:
- Rental income from a newly purchased house
- Royalty from a book
- Interest from a new investment
Example
- Rental income starts: 1 December 2026
- Tax Year: 1 December 2026 to 31 March 2027
Quick Summary
Situation| Tax Year
Regular taxpayer| 1 April – 31 March
Business starts on 15 July| 15 July – 31 March
Rental income starts on 1 November| 1 November – 31 March
Easy Way to Remember
- Normal Tax Year: 1 April to 31 March.
- New Business: Starts from the date the business begins and ends on 31 March.
- New Source of Income: Starts from the date the income begins and ends on 31 March.
Conclusion
Under the New Income Tax Act, 2025, the Tax Year is generally a 12-month period from 1 April to 31 March. However, if a new business or a new source of income starts during the year, the Tax Year begins from the actual commencement date and continues until 31 March. This ensures that tax is calculated only for the period during which the income actually existed.