Section 3 of the Income-tax Act, 1961 subject to its proviso, defines “Previous year” for the purposes of the Income-tax Act, as the financial year immediately preceding the assessment year.
The assessees or the persons concerned, many a time, wrongly write or misunderstand the changes brought by the Finance Act due to the phenomenon of previous year/ assessment year, while, usually, both remain the same. This also, sometimes, causes practical problems in the workings of income-tax.
Therefore, the terms previous year and assessment year may be changed to only one i.e. assessment year ( consisting of financial year) as remains in other Government Departments.