Posted in Finance, Accounting and Economics Terms, Total Reads: 141
Definition: Short Tax Year
Short tax year is when the tax year (the time for which tax is to be imposed on) is less than 12 months. In Short tax year, the tax to be paid is not for 12 month but the actual time for which the entity on which tax is being imposed is active and fully functional.
The situation of short tax year can arise in two cases
i. If a tax payer dies in middle of tax year, then the concept of short tax year arises and the tax is imposed from the beginning of tax year till the date on which person died. For Example- If a person dies on April 1,2015 , then first the return should be filed on behalf of decedent by 15th of the 4th month( i.e. by 15th July, 2015 in this case)after the close of decedent tax year
ii. The company or the entity on which tax is being imposed starts or dissolves in between the tax year. For example - If a calendar year following company starts on 1st August, 2015, then again short tax year is applied here and tax will be paid from 1st August, 2015 to 31 December, 2015.