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Who is liable to pay income tax in India?

Who is liable to pay income tax in India?

07-Sep-2025

Tax

Answer By law4u team

In India, liability to pay income tax depends on the residential status of the individual or entity and the source and amount of income earned during a financial year. Who is Liable to Pay Income Tax? 1. Resident Individuals Residents are taxed on their global income (income earned in India and abroad). If their total income exceeds the basic exemption limit, they must pay income tax. 2. Non-Resident Individuals (NRIs) NRIs are taxed only on income earned or received in India. If this income exceeds the exemption limit, they are liable to pay tax. 3. Hindu Undivided Families (HUFs) Taxed similarly to individuals on income earned. 4. Partnership Firms and Limited Liability Partnerships (LLPs) Taxed on income generated from business or profession in India. 5. Companies Domestic companies are taxed on global income. Foreign companies are taxed only on income earned in India. 6. Associations of Persons (AOP) and Bodies of Individuals (BOI) Taxed on income earned. 7. Local Authorities Taxed on income earned in India. Key Points on Liability: Basic Exemption Limit: Individuals whose total income is below the exemption limit (e.g., ₹2.5 lakh for general individuals) are not liable to pay tax. Tax Deducted at Source (TDS): Certain incomes have tax deducted at source by the payer; the deducted amount is credited to the taxpayer’s account. Advance Tax: If tax liability exceeds ₹10,000 in a year, the taxpayer must pay tax in installments as advance tax. Filing Returns: All individuals or entities with taxable income exceeding the exemption limit must file Income Tax Returns (ITR) annually. Summary: You are liable to pay income tax in India if: You have income above the basic exemption limit. You are a resident and earn income globally or a non-resident earning income in India. You are a company, firm, HUF, or other taxable entity with income chargeable to tax.

Answer By M.srinivasan

In India, The Liability To Pay Income Tax Rests On Every Person Or Entity Earning Taxable Income Above The Prescribed Threshold, As Defined By The Income Tax Act, 1961. post by m. srinivasan yadav Categories Of Taxpayers The Following Types Of Taxpayers Are Liable To Pay Income Tax: Individuals (Resident Or Non-resident, Including Minors With Taxable Income) Hindu Undivided Families (Hufs) Firms And Companies (Domestic And Foreign) Association Of Persons (Aops) And Body Of Individuals (Bois) Local Authorities Artificial Juridical Persons Income Thresholds For Individuals, Income Tax Is Mandatory If Annual Income Exceeds ₹2.5 Lakh (For Those Below 60 Years). For Senior Citizens (Aged 60-80), The Limit Rises To ₹3 Lakh. For Super Senior Citizens (Aged 80+), The Threshold Is ₹5 Lakh. All Other Entities (Companies, Firms, Hufs, Etc.) Pay Tax As Per Respective Profit Or Income Rules. Residential Status & Scope Resident And Ordinarily Resident: Taxed On Global Income. Resident But Not Ordinarily Resident: Taxed Only On Income Earned Or Accrued In India, And Certain Incomes From Abroad. Non-resident: Taxed Only On Income Earned Or Received In India. Taxable Income Sources Common Taxable Sources Include: Salary Or Wages Business Or Professional Income Capital Gains Rental Income Income From Other Sources (Interest, Lottery, Etc.) All Entities, Including Freelancers, Self-employed Individuals, And Companies, Are Liable To Pay Tax If Their Income Crosses The Mandated Limits. Legal Obligation Filing Tax Returns And Paying Dues Is A Legal Responsibility, Failure Of Which Can Invite Penalties And Prosecution. In Summary: Any Person Or Entity Who Earns Taxable Income Over The Specified Limits Is Liable To Pay Income Tax In India, With Consideration Of Their Residential Status. Thank You

Answer By Ayantika Mondal

Dear Client, In India, the scope of tax on income is not limited to individuals, but we see that it has been extended to a large number of entities as per the Income Tax Act of 1961. Also, any “person” which reports income that is subject to tax after a certain level is made to pay tax. The Act includes these terms for “person”:. Individuals: This is what we see the greatest of the time which includes salaried professionals, self-employed professionals and those with other income sources. Tax liability for an individual is determined by income and age and is based on different tax slabs. Hindu Undivided Families (HUF): An HUF is a distinct tax entity. Companies: Both at home and abroad, companies that earn in India are subject to pay corporate income tax. Firms: This also includes partnership firms and LLPS. These are groups of people which come together for a like cause and to earn income. Local Authorities: Municipalities, local boards, as well as other such entities are included. Artificial Juridical Persons: This is a group for which we put forward what may at times be an extensive array of entities which do not fit into other groups like that of the universities or statutory corporations. It is to be noted that tax liability also depends on a person’s residential status. That which makes a person a Resident of India plays a role in that he is to pay tax on his global income income earned in and out of India) as opposed to a Non- Resident who only pays tax on income which comes into India. The point at which income tax becomes due is when the total taxable income of any of those entities exceeds the basic exemption set out in the annual Union Budget. I hope this answer helps to resolve your queries. Don’t hesitate to reach out with any further questions. Thank you!