As per Section 2(29A) of the Income Tax Act, 1961, unless the context otherwise requires, the term “Liable to Tax”, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country.
***
Tax liability is an important concept within the Income Tax system. The term “liable to tax” or “subject to tax” refers to individuals or organizations who are legally responsible for paying income tax, i.e. legal obligation of a person or entity (including individuals, HUFs, Firms, Companies, BOIs, AOPs, AJPs, etc.) to pay the income tax they owe to the Government.
Depending on the income tax law, the tax liability may vary between individuals and businesses. It is important for all type of persons (taxpayers) to understand their tax liabilities in order to pay their taxes accurately and on time. Failure to comply with tax laws can result in penalties and interest, so it is important to ensure that all tax liabilities are taken into account.