Income Tax Return of Deceased

DEATH of a dear one is an unbearable blow. Apart from the loss his family has to confront issues relating to the transfer and distribution of the deceased’s estate, which includes all his property, assets etc. Then there are tax issues to be dealt with. These include filing of returns for income earned by the deceased till the time of death, and helping the tax department with assessment proceedings. What happens if the taxpayer dies before he or she files the returns? Do returns have to be filed on behalf of dead person,who has to file returns on behalf of dead person, how to file returns on behalf of dead person? If there are tax liabilities who pays for them. Let’s start from the beginning In the event of death of the assessee  the income tax returns on behalf of the dead person has to be filed. In case of a deceased person, the  the legal heir of the deceased person has to file income tax return for the financial year. He has to register as a Legal Heir to do e-Filing on behalf of the deceased.There is no change in Income tax computation and procedure of filling income tax return. This article explains in detail.

Filing of income tax return after death

Even when a person dies, the assessment of his income is to be done upto the time of his death.This is for an individual and is covered under Section 159 of the income tax act. The legal representative of the deceased has to file the income tax return for the income on which the deceased.  The income earned in the year of death is classified in two categories:

  • Income earned from April 1 till the date of death
  • Income earned thereafter till the end of the financial year.

Usually, spouse or close relative of the deceased takes charge as the legal representative. Else, in case of will of the taxpayer who has passed away, the executor is held responsible.  The legal representatives will have to file returns in the deceased’s name for income earned till the date of death. Subsequent earnings are to be taxed in the hands of the legal representative/executor of the deceased’s estate. So if an individual died on 12 June 2014, his legal representative will have to file on his behalf for the financial year 2013-14 as also for the income for three months of 2014-15 in the next assessment year.  The only difference in filing return one self and by legal assessee is that in case of alive assessee, he himself or through person authorised by him files Income Tax Return whereas in case of deceased assessee liability to file return and pay taxes is either on legal representative or executor. Process of tax calculation, filing returns remains the same. How to get the information, making senses of information to file the returns like Bank accounts statements, Form 16, well that’s a battle or war that you would have to fight.

Example : Kirit inherits a fixed deposit (FD) of Rs. 10,00,000. Shruti inherits an apartment from her father which was rented out. Interest received from the FD and rent received from the apartment before the death would be taxed as income of the deceased. The interest received from the FD and rent received from the apartment after the death would be taxed in the hands of  Kirit and Shruti respectively. Our article On Inheriting,Tax of Property,Mutual Funds,Shares,FD etc explains about inheritance in detail.

Legal representative has to register at the income tax website as Legal Heir with a list of documents (explained here). If the request is approved then he can file returns on behalf of the dead person.On the return, the name should be mentioned as late (name of deceased) through legal heir (name of person filing)  ex LATE Mr / Mrs. _________ through legal heir Mr / Mrs. _________

If the karta of an Hindu Undivided Family (HUF) dies then as HUF is not a living entity so death of the Karta  does not lead to any change in taxation. The HUF continues to be taxed as before and the senior most male co-parcener in the HUF becomes the Karta.

Who is Legal Heirs or Legal Representatives, Executor

Who is Legal Representatives or Legal Heir? Usually, spouse or close relative of the deceased takes charge as the legal representative. Else, in case of will of the taxpayer who has passed away, the executor is held responsible

If there are many heirs, one of the heirs cannot assume himself as legal heir unless declared so legally to file the return on behalf of the dead person. Suppose, if other descendants do not have any objection right then, but later at some point of time someone raises dispute about heir being not authorised? What would be heir position to save from the case of cheating or fraud with the other legal heirs as well as the IT department of the Government? Hence one needs to obtain a Legal Certificate . Income Tax Authority expects Legal Heir certificate or Affidavit in presence of a Notary Public. Following documents are accepted as Legal Heir certificate.

  • 1. The legal heir certificate issued by court of law
  • 2. The legal heir certificate issued by the Local revenue authorities.
  • 3. The certificate of surviving family members issued by the local revenue authorities
  • 4. The registered will
  • 5. The Family pension certificate issued by the State/Central government.

In practical terms , the heir himself if there is only one or if there is more than one heir , should first make an agreement among different heirs so that others assign one person as legal representative for the purpose of income tax matter. That person can sign the return of the deceased person and can appear before the assessing officer in case of any proceedings.

Executor and Income Tax

Typically, an executor is appointed through a will made by the deceased, and he administers the estate as per instructions in the will. If the deceased hasn’t left a will, the estate is administered in accordance with the law of succession. The executor controls the estate of the deceased till the administration of the estate is complete, that is, till all the assets are distributed to the beneficiaries.

Tax treatment of estate income. The estate could generate income before all the assets are distributed. While such income accrues to the estate, it is taxed in the hands of the executor from the time of the owner’s death till all the assets are distributed. The executor pays the tax out of the income earned from the estate. However, if some of the income is being distributed to legal heirs before distribution of assets, such income is taxed in the hands of the legal heirs. For tax purposes, the residential status of the executor is to be derived from the status of the deceased in the year of death. For instance, the executor would be a resident if the deceased was a resident in the year of death, and a non-resident if the deceased was a non-resident in the year of death. Thus, if the deceased was a non-resident, only the income earned in India would be liable to tax in the country

Status of the executor. If there is only one executor for the deceased’s estate, his status would be that of an individual, but if there is more than one executor, their status would be that of an Association of Persons(AOP). In both cases, however, the returns filed would be assessed as in the case of an individual. Thus, income from the estate would be taxed at the normal rates of tax applicable to individuals. The executor would be eligible for rebates and deductions on any investments from the income of the estate, but he would not get the extra rebate available to a senior citizen or woman assessee below the age of 65 if the deceased was a senior citizen or a woman. In the case of losses, since the executor is assessed income of the estate of the deceased. He can carry forward any losses incurred by the deceased prior to death, and this can be adjusted against the income arising from the estate while he is in control of it. Any outstanding tax liability payable by the deceased can be enforced against the deceased’s estate, and the executor is bound to make good the payment. However, the executor will not be liable or subject to any prosecution proceedings launched against the deceased before his death. Further, an executor administers the estate as a representative of the deceased, and not on behalf of the beneficiaries. Therefore, even if the deceased made separate wills appointing different executors for different properties, a single return would have to be filed for the entire estate, and the tax department would conduct a single assessment

Tax Liability of Dead Person – Who’s responsible?

Legal Heir is not responsible to pay income tax of the deceased from his own money. If there are tax liabilities of the dead person,legal representative  is  liable to pay income tax on behalf of the deceased. Advance tax payments and self assessment tax payments are also to be done by the legal representative. The tax is to be recovered from the estate of the deceased. Legal representatives would be personally liable to the extent of the assets to which they come into possession. Thus, all the legal heirs are liable upto the extent of the assets that they inherit.

Example: Shyam and Shankar  are brothers. Shyam receives Rs. 50,000 and Shankar Rs. 1,50,000  after the death of their father. Tax liability of the father is Rs. 75,000, so Shyam can not be liable to pay more than Rs. 50,000 (the upper limit), as that is what he inherited from his father

How to Register as a Legal Heir at incomeTax efiling Website

From IncomeTax Website https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html

User should register as a Legal Heir to do e-Filing on behalf of the deceased. Deceased person’s PAN and Legal Heir’s PAN should be registered in the e-Filing portal. If Deceased person PAN is not registered in the portal then the Legal Heir can register on behalf of the deceased person.Following are the steps for registration of Legal Heir:

  • Step 1 − LOGIN to e-Filing application and go to ‘My Account’ –> Register as Legal Heir.
  • Step 2 − Provide the necessary details and attach a zip file containing the below documents. Note: The zip file attachment should not exceed 1Mb.
    • 1. Copy of the Death Certificate
    • 2. Copy of PAN card of the deceased
    • 3. Self-attested PAN card copy and
    • 4. Legal Heir certificate** or Affidavit in presence of a Notary Public. ** Following documents will be accepted as Legal Heir certificate.
      • 1. The legal heir certificate issued by court of law
      • 2. The legal heir certificate issued by the Local revenue authorities.
      • 3. The certificate of surviving family members issued by the local revenue authorities
      • 4. The registered will
      • 5. The Family pension certificate issued by the State/Central government.
  • Step 3  Click Submit.
  • Step 4  The request will be sent to the e-Filing Administrator.
  • Step 5  The e-Filing Administrator will review/verify the request and approve/ not approve as applicable. e-Filing Administrator may approve as Temporary Legal Heir or Permanent Legal Heir, based on the documents uploaded. An e-mail is sent to the registered e-mail ID.

On e-Filing administrator’s approval, the ITR Form of the deceased person can be uploaded via LegalHeir login.The Legal Heir should add his/her PAN in the verification part of the ITR Form, validate and generate the xml of the return and upload the return of the deceased using the Legal Heir login.

A person is treated as a Temporary Legal Heir when the person fails to submit any one of the five Legal Heir certificates mentioned in Step 2. The Temporary Legal Heir is allowed only to upload ITR/Forms and will not be able to access all other services, which includes add CA to submit audit forms (other than ITR) on behalf of the deceased.

A person is treated as a Permanent Legal Heir whwhen the person submits any one of the five Legal Heir certificates mentioned in Step 2. The Permanent Legal Heir may file Income Tax Returns/Forms,

  • View Status of Income Tax Return/Forms, ITR-V Acknowledgment and other filing status of e-Filed
  • Returns/Forms in respect of the deceased.
  • One can also view the status of the request under My Request List menu, post Login.

What to do in case of Refund of deceased person

Where there is any refund in case of a deceased assessee, the refund can be received by the legal heir just like he/she can sign the Return of Income. Refund cheque can be encased  in any bank account where the deceased holder was a joint account holder with any other person. If there is no such joint account, the nominee appointed by the deceased assessee can operate the account. Where there is no nominee, the heirs of the deceased person are required to submit various documents as evidence such as Death Certificate, Succession Certificate from court, etc. as per the procedure of different banks. From FY 2014-14(AY 2014-15) i.e returns filed by 31 Jul 2014 Refund will be credited directly into the account , no cheque will be issued.

 Related Articles:

It is said that the only sure things are death and taxes, but even death doesn’t save a person from having to pay taxes or filing his income tax return. Legal representative have to file the Income tax return of deceased. Have you had to file the Income tax return of your loved one? How difficult was the process? What problems you faced? Was it difficult to get the Legal Heir certificate?

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  2. ANKIT says:

    My grandmother expired on 19.2.2012. There is some interest income in her name for which i need to file return of income of her Estate. She was 96 years old when she expired. Kindly inform whether her estate return gets the benefit of super senior citizen ( Rs. 500000.00) or senior citizen or as individual. My uncle is her sole legal representative and he is 59years old . I am confused as to which exemption limit i should take. Last year i paid taxes with rs. 200000.00 exemption limit and the income tax department sent me refund after considering rs. 500000.00 exemption limit.

    • Kirti says:

      Hello Ankit
      Are you filing returns for your grandmother as her an individual ?
      If individual she falls in senior citizen(60 years+) or super citizen (80 years+) category.
      The income up to the date of death would be taxable in the hands of the deceased. The tax would, however, be leviable and recoverable from the legal representatives of the deceased in a like manner and to the same extent as the deceased.

      The incomes that accrue after the date of death would be taxable in the hands of the legal heirs in their individual capacity. If, however, the legal heirs cannot be determined with certainty, the income shall be chargeable in the hands of the executor/executors.

      The legal heirs are not liable for any tax or other liability of the deceased if it is more then the value of assets.

  3. Pratik Kamdar says:

    Hi, need your help.

    My great grand dad expired in 1980 something. He had a share of investment in a property and he had two sons. The names of his two sons was not included in the property after his death. In 2007, my great grand dad’s share in this property was sold and a tax return in the name of estate of great grand dad was filed. The tax officer of my grand dad is now saying that deceased’s return cannot be filed so much time after his death and he has initiated assessment in my grand dad’s PAN. Can you tell me if the argument of the tax officer is valid?

    • Kirti says:

      Pratik yes the argument of tax officer is valid. Filing return in 2007 for 1980 is not possible. But can the tax officer initiate assessment for dead man’s estate, better contact a tax lawyer or CA.
      You can file income tax returns of only last two years. Quoting from our article Filing Income Tax Returns after deadline
      Last date for filing returns for an individual is usually 31 Jul of the assessment year. So last date for filing returns for FY 2013-14 which is AY 2014-15 was 31st Jul 2014.
      If one missed the last date for filing returns, one can still file returns till 31st Mar of the Assessment year . So one can still file for returns for FY 2013-14 which is AY 2014-15 till 31st Mar 2015.
      If one misses the 31 March AY deadline as well, they can still file their return by 31 March of the next assessment year. However, this will be treated as a belated return. i,e for FY 2013-14 which is AY 2014-15 one can still file Belated return from 1 Apr-2015 to 31-Mar-2016.

      Capital gain or loss would have to paid by the person or persons who inherited the property. Our article On Inheriting,Tax of Property,Mutual Funds,Shares,FD etc explains the process in detail.

  4. Cyrus says:

    My aunty expired in on 19th March 2013. She was 86 years old at the time of death. She had no issues. I and my two sisters are the only legal heirs. There is no will made.

    There was a buy back offer of shares from a limited company in February, 2014. Besides my aunty, I was the only joint shareholder of this company.
    I accepted the buy back offer by submitting death certificate of my aunty and money received from the company was deposited by me in my aunty’s bank savings account, where I am the joint account holder.

    Please advice me on following:
    1) Can I file return in her name as a legal representative, showing long term capital gain on this buy back of shares?

    2)If I can file return in her name, what would be the threshold limit of income tax applicable, since she was a senior citizen.

    3) If I cannot file in her name and since I was the joint holder with her, does this long term capital gain tax becomes payable by me in my return of income? and what will be cost of acquisition of shares to be taken?

    Please advice and also let me know if the other alternatives if any missed by me.

    Thanks and awaiting your reply.

    • Kirti says:

      Yes you should be able to file her return as a legal representative.
      As you filing on her behalf and she was senior citizen then she gets all the advantages of the senior citizen rather super senior citizen (who are above 80 years old)

      Which returns are you planning to file
      - For FY 2013-14 (AY 2014-15) for which deadline was 31 Jul or for FY 2012-13(AY 2013-14)

      From what I can make out the buyback happened after her death and as you are her legal heir the capital gain is in your name . Could you cross check this with a CA.
      I will also try to find out.

      I am not sure about capital gains on buyback but from moneycontrol Find out: Different tax implications to share buyback
      When this direct buyback route is taken, then the investor does not get the benefit of the zero rate of tax on long term capital gains. The conditions related to the application of these rates are not fulfilled.

      The investor does not transact on the stock exchange and there is no securities transaction tax paid. So this will not allow for the application of the zero tax rate.

      The tax would be 20 percent with the benefit of indexation or 10 percent without the benefit of indexation.

  5. RANA UDAY says:

    Thank you Mr Kirti for the information. It was very helpful. Can you throw further light on – how to go ahead for filing Income tax return of deceased after date of death and in subsequent financial year?
    The ITR from date of death to 31st march of the concerned FY and the subsequent financial year, is to be filed as “Estate of …deceased” by Executor/executors (can be as individual or AOP)
    I am unable to find the proceedural aspects required. Do we need to take a seperate PAN or do we file under PAN of deceased?
    I am facing this typical case and need some views/suggestions. Thank you

  6. Jagdish J. says:

    Article is exceelant. If you had given Assessment Order od dec eased itould be helpful to understand more. Thanks

    • Kirti says:

      That’s a great suggestion. Thankfully I personally didn’t have to file such return. My reader needed information on the topic, hence I wrote about it.
      Shall add relevant pictures when I get them

  7. Athenas Take says:

    Packed with information and I must say that I didn’t know 99% of it. Thank-you for sharing and enlightening.

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