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Tax Liability

Reviewed by Sweta | Updated on Aug 16, 2023



Tax liability refers to the income tax, other direct taxes, and indirect tax liability levied by the government. The liability may be due from any taxpayer, namely individual, corporate, partnership, LLP, LLC, and others.

The tax liability may be an estimate of annual tax dues to be paid in quarterly instalments as advance tax. The balance tax liability on income should be paid while filing the annual income tax return.

Understanding Tax Liability

Tax liability is a legal liability as per the tax laws of the country. The tax laws are applicable to the residents of the country as well as to non-residents.

In India, the quarterly due dates to pay advance tax during a financial year are 15 June, 15 September, 15 December, and 15 March. A financial year runs from 1 April of a year to 31 March of the next year.

Tax liability arises from various types of incomes, such as income from carrying on a business or profession or other sources. In India, the broad classification of categories of income includes income from salary, house property, business or profession, capital gains, and other sources. Capital gains constitute of incomes from the sale of a capital asset, which are specific capital receipts. Other sources include all residuary sources of income.

All tax dues must be paid on or before filing the annual income tax return. In India, the due date to file the annual income tax return is 31 July for non-audit cases, 31 October for audit cases, and 30 November for transfer pricing cases.

All tax dues can be paid online through an online challan, and a taxpayer should mention the details of tax paid in their income tax return.

The indirect taxes consists of the Good and Service Tax and other local taxes. The GST dues need to be paid on a monthly or quarterly basis as prescribed by the GST law. The taxes should be paid on or before filing the GST returns. The other local taxes include luxury taxes, entertainment tax, entry tax, and customs duty.


A tax liability gets calculated as per the applicable tax rates for a financial year. In the case of individuals and HUF taxpayers, the tax liability is as per the applicable slab rates. For companies, partnerships, LLPs and others, the tax rate is a flat rate. The corporate tax rate ranges from 22% to 40% (excluding surcharges and cess). However, capital gains and other special incomes are liable for a special rate of tax.

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