Business Accounting Tutorials | Income tax Liability

Let’s learn about Income Tax Liability, but before that, we need to know that income can be broadly classified as Indian Income and Foreign Income.

‘Indian Income’ is always taxable in India in the case of all taxpayers, whether resident or non-resident.

‘Foreign Income’ is taxable in India if the assessee is

Resident (in case of a firm, company, and every other person ) or
Resident and ordinarily resident (in the case of an individual or a Hindu Undivided family ) in India.

If an individual or a HUF is resident but not ordinarily resident, foreign income is taxable only if it is

Business income and business is controlled from India, or
Professional income from a person who is set up in India. Otherwise, foreign income is not taxable in the hands of resident but not ordinarily resident taxpayers

Foreign income is not taxable if the assessee is non-resident in India [section5(2) of the Income Tax Act]

Sections 9 of the Income Tax Act defines ‘income deemed to accrue or arise in India’. It will be Indian and taxable in all the cases.