In this world nothing can be said to be certain, except death and taxes. Even after death of a person, taxes (if any) are certain. The income earned by a person who has expired can still be subject to taxes.
So, who is liable to file income tax return of a deceased Assessee? Who is liable to clear tax dues? How to file ITR of an expired person? Let’s discuss….
Financial year (FY) is the year in which an individual would have earned the income. If you are filing a return this year, the financial year will be 2018-19. For example, if you have had an income between 1st April 2018 and 31 March 2019, then 2018-19 will be referred to as FY. Assessment Year (AY) is the year in which you file returns i.e., 2019-20.
What if an individual who is a tax assesee unfortunately expires during a financial year? Is he/she still liable to pay taxes after the death?
Besides other legal formalities like transfer of assets, distribution of property, execution of WILL (if any) etc., filing of ITR of a deceased person is also a very important formality and can be a cumbersome task.
Who has to file Income Tax Return of Deceased person?
Income tax return of a deceased person can be filed by his / her nominee or legal heir (legal representative). To file the ITR on behalf of the deceased, the concerned individual has to get himself / herself registered as a legal heir on e-Filing portal of IT department.
The income earned during a FY by a deceased person can be divided in to two parts ;
Income earned from April 1 till the date of death
For example : If a tax assessee (Mr X ) has died on 1st November, 2018 then the legal heir has to file ITR on behalf of the deceased for the income earned from 1st April, 2018 to 1st Nov, 2018.
Though legal heir has to file ITR on behalf of the deceased, there is no liability to pay the taxes of the deceased by the Legal Heir from his own pocket. Thus, the liability is limited to the extent of value of estate inherited by the legal heir from the deceased.
For example : If son (Mr Y) of Mr X inherits a property which is valued at say Rs 10 Lakh and if the tax liability of Mr X is say Rs 12 Lakh, then in this case Mr Y cannot be held liable to pay more than Rs.10 lakh as taxes.
Income earned thereafter till the end of the financial year
For example : If a tax assessee (Mr X ) has died on 1st November, 2018 then the income accrued on his name from 2nd Nov, 2018 till 31st March, 2019 has to be clubbed with the income of his son (Mr Y). Son is liable to pay taxes from his own pocket. In case, there are multiple legal heirs, taxes can be borne by all of them.
Below are the important points that need to be kept in mind ;
- You as a legal heir or representative has to calculate the income of the deceased from the start of the year till the date of death and thereby the tax payable on it in the same manner as if the deceased is alive.
- You may have to refer the deceased’s Bank Statements, investments, Form 26AS and other relevant documents necessary for income tax calculation.
- If there is any income which is earned on the inherited assets, after the date of death then it is taxable in the hands of you (legal heir). Legal heir should include this income inherited from the deceased in his own income while filing own ITR.
How to register as a Legal heir on e-Filing portal?
- You can visit e-Filing portal and login with your credentials
- Click on ‘Add / Register as Representative’ option Under ‘My Account’ menu tab.
- Select request type as ‘New Request’, ‘Register Yourself on behalf of another person’ and category as ‘Legal Heir’. Click on Submit button.
- You need to provide the details of deceased (like his/her PAN, Date of Death, name etc.,). Attach a Zip File with the below scanned documents ;
- Copy of the Death Certificate
- Copy of PAN card of the deceased
- Copy of PAN card of the Legal Heir and
- Legal Heir Certificate issued by local authority (or) Surviving member certificate (or) Pension order issued by State/ Central govt (or) Registered WILL.
- Kindly note that following documents will be accepted as Legal Heir certificate;
- The legal heir certificate issued by court of law
- The legal heir certificate issued by the Local revenue authorities.
- The certificate of surviving family members issued by the local revenue authorities
- The registered will
- The Family pension certificate issued by the State/Central government.
- Once you submit the request, it is sent to the e-Filing administrator for approval.
- Based on the details and documents submitted by you, the admin may approve or reject your request. e-Filing
- The status of request can be tracked under ‘My Account -> Add / Register as Representative -> View Request’.
- Once your request is approved, as a representative you will have ‘Full Access’ except ‘Profile Settings’ & ‘Add/Register as Representative’ functionalities, up to the date of authorization.
How to file Income Tax Return for the deceased Tax Assessee?
- Once your request for ‘Add Legal heir’ is approved, you can login to e-Filing portal with your login credentials.
- You can click on ‘Upload Return’ under ‘e-File’ tab.
- Select the PAN of the deceased person and applicable ITR form to upload. (Read : ‘Which ITR form to File?‘)
- Select applicable Assessment Year and upload XML file.
- As a Legal Heir you can Digitally Sign the ITR of the deceased (or) can e-Verify the Return as per your choice.
Important Points & FAQs :
- Income Tax Notice & Scrutiny : After intimation about death of a person to an ITO, the ITO concerned cannot issue notice in name of deceased, and if he does so and makes assessment then it will be void ab initio. But they can issue tax due notice to legal heir. Penalty proceedings (if any) can be initiated against the legal heir. But as discussed, the tax liability would be limited to the extent of the assets inherited by legal heir(s) from the deceased.
- Can multiple legal heirs file ITR of a deceased person ?
- If there is only one legal heir of the deceased then he/she will act as legal representative, but in case of more than one legal heir any one of them with the consent of all, can act as legal representative for the purpose of income tax. As per section 157 of Income Tax Act, 1961, legal representative will be entitled to collect proportionate tax from other legal heirs as a part of their share.
- If multiple legal heirs want to file ITR then as per provisions of Income Tax Act return is required to be filed in capacity of AOP (Association Of Persons) or BOI (Body of Individuals).
- Can Joint bank accounts be continued? – If taxpayers have joint account and one of the A/c holder dies then account can be continued as it was operated before by the survivor. Also, inform the banks and other financial institutions about the unfortunate incident and get the records updated accordingly.
- How many ITRs can be filed? – I believe that only one ITR on behalf of the deceased can be filed by a legal heir (but, I could not find any official source on this, you may let us know if this is incorrect).
- Can Legal heir receive Refund (if any)? –
- Yes, If refund has been claimed or to be claimed then it can be issued to Legal Representative. From FY 203-14 (AY 2014-15), refund will be credited directly into the account and no cheque will be issued.
- If an assessee has expired after filing his return for a particular A.Y. and the refund has been issued in his name, the legal heir can approach the PRO (Public Relations Officer of IT dept) along with necessary documents like attested copies of death certificate, Last Will, address and identity proof of the legal heir, NOC of other relatives in form of an affidavit etc. and submit his application for further action.
- How to get Legal heir certificate ? – You can obtain a Legal Heir / SuccessionCertificate through your Taluk / Thasildhar or through the District Civil Court of your area. You have to submit copy of Death certificate, Identity Card and prescribed application form.
Kindly note that you can file ITR through offline mode also. You (legal heir) has to meet the AO (Assessing Office) and produce the required documents such as, self ID proof, relationship proof with the deceased assessee (legal heir / succession certificate), death certificate of the deceased assessee, as well as PAN copy of the deceased etc., After verifying, the documents the AO will provide the approval for filing the tax returns for the deceased assessee to the legal heir/representative.
Filing Income tax return of deceased person can be a challenging task. You need to have all the required information about his/her income, access to bank statements, Tax credit statements (TDS & Form 26AS), investments etc., to file ITR with correct income details. Also, a dispute might arise if there is no unanimity on the division of the Estate (Assets) among the legal heirs and this can pose a problem in doing the tax compliance on time, for and on behalf of the deceased.
Hence, it is advisable to inform your loved ones, nominees or legal heirs about all the investments that you make and about your tax liability status every financial year. Hope you find this article useful. Kindly share your comments. Cheers!
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Reference : eFiling portal, ClearTax & CharteredClub) (Post first published on : 09-May-2017)