The government expects you to pay your share of taxes whether your business is managed as a firm or you are earning personally. The regulations are different for both though. You may prepare more effectively, minimize errors, and pay the correct amount by knowing the tax liability of an individual and firm.
Let’s simplify things for you.
What is tax liability?
Tax obligation is the legally mandated tax you must pay to the Income Tax Department determined by your income. Whether you are a person or a company—partnership or LLP—the tax laws change accordingly.
Individual Tax Liability Based on Old Regime FY 2024–25
| Income Range | Tax Rates |
| Up to ₹ 2.5 lakh | 0% |
| ₹ 2.5 lakh – ₹ 5 lakh | 5% |
| ₹ 5 lakh – ₹ 10 lakh | 20% |
| Above ₹ 10 lakh | thirty percent |
Higher exempt limitations apply to older persons and extremely senior citizens.- If income falls within ₹5 lakh, rebates under Section 87A are possible.
Further Important Points
- Deductions under Section 80C, 80D, 24(b), etc. are available to individuals.
- Additionally eligible for standard deduction of ₹50,000 are salaried persons.
- People have options between a new tax system with reduced rates but no deductions and an old tax system.
Firm Tax Liability: Partnership or LLP
- taxed thirty percent flat on overall profit
- No tax slab similar to personal income.
- 12% surcharge if income more than ₹1 crore
- Added on the overall tax is Health and Education Cess of 4%.
For instance: the firm’s profit comes at ₹10 lakh.
- Taxes equal ₹3 lakh (30%).
- Cess (4%) = ₹12,000
- Total tax due is ₹3.12 lakh.
Calculations for Businesses
- Business expenditures like rent, wages, utilities, internet, etc. are claimed by firms.
- Under restrictions, interest on partners’ capital and pay is permitted (Section 40(b))
- Companies have to keep books of records and might need an audit.
Comparatively, individual vs firm
| Characteristic | Personal | Company (Partnership / LLP) |
| Tax rate | slab-based (5% to 30%) | Flat 30% |
| Deductions | Accessible in several areas. | Mostly linked to business |
| Audit Requirements | Only if turnover runs higher than limit | Mandatory if income exceeds ₹ 1.5 crore |
| Tax Regime Flexibility | Yes (Old/New Regime) | Not much adaptability |
| Surcharge & Cess | 4% over ₹50L/₹1Cr | Cess 4%, surcharge over ₹ 1Cr |
Advice to Control Taxes More Effectively
- Based on income and deductions, choose appropriate tax regime (for persons).
- Keep correct documentation and receipts.
- If obligation exceeds ₹10,000 in a year, pay advance tax.
- File ITR-3 for people with business or ITR-5 for companies.
Finish
The tax liability of an individual and firm is different in terms of rate, deductions, and regulations. Individuals pay slab-based taxes and personal deductions; businesses pay a fixed rate but can claim business costs. Whether you manage a business with partners or work alone, knowing these variations helps you stay compliant and make smarter financial decisions.
