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Income-tax Act, 1961 · Chapter I: Preliminary

Section 3: —Previous year‖ defined

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

The previous year is the financial year immediately before the assessment year. Income earned in the previous year is assessed in the following assessment year.

  • For a business or profession newly set up, or a new source of income, the previous year starts on the date of setting up or the date the source arises, and ends with that financial year.

Example: Income earned during a financial year that ends in March is taxed in the assessment year that begins the following April.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Official text

Previous year‖ defined.—For the purposes of this Act, —previous year‖ means the financial year immediately preceding the assessment year:

Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.]

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Supreme Court judgments citing the section 3