Section 3 of ITA, 1961 : Section 3: Previous Year Defined

Explanation using Example

Imagine that Mr. Sharma starts a new online retail business on July 1, 2022. According to the Income-tax Act, 1961, the financial year in India runs from April 1 to March 31. Therefore, for most taxpayers, the previous year for the assessment year 2023-2024 would be the financial year 2022-2023. However, since Mr. Sharma's business is newly set up, his previous year for the assessment year 2023-2024 would be from July 1, 2022, to March 31, 2023. This means that for tax purposes, he will report the income earned from his new business during this period in his tax return for the assessment year 2023-2024.