While death is certain, tax compliances does not necessarily end with it. In India, a person’s obligation to pay the taxes does not end even after their demise. When a taxpayer dies, their income tax dues do not disappear. Income earned before their death remains taxable while the pending tax filings and outstanding demands must be still dealt with.
After the death of a taxpayer, the tax liability is required to be payable on his/her behalf by the legal representative, who must take care of the filing of the Income Tax Return and settling of any outstanding dues on behalf of the deceased person.
This article explains who is responsible for taxes after death, how the return is to be filed and how are the liabilities settled.
Governing Section
Section 159 of the Income Tax Act, 1961 or the Section 302 of the Income Tax Act, 2025, both addresses the tax liability of legal representatives upon the death of the assessee. These provisions ensure that the death of a taxpayer does not absolve the estate from tax obligations and that the legal representative steps into the shoes of the deceased for the discharge of such liabilities.
Who is Legal Representative: Usually, spouse, child or close relative of the deceased takes charge as the legal representative. However, if a will is made and an executor is appointed, the executor shall act as a legal representative.
Registration as Legal Representative
For filing of the Income Tax Return or replying Income Tax notice of the deceased, the primary step involved is to get registered as the legal heir of the deceased with the Income Tax Department. A request for registering as legal heir is to be sent, which on approval authorises the legal heir to file a return on behalf of the deceased.
The necessary steps which are required to be followed for registering as a legal representative are as under:
- Logging onto the Income Tax Portal using Legal Representative’s Credentials
- Go to Authorised Partners and Register as Representative Assessee.
- Submit a request by entering the details of the deceased and upload scan copy of the Death Certificate, PAN of the deceased, PAN of the legal heir, Legal Heir Proof etc.
- Once the Income Tax Department approves the request, ITR can be filed by the representative assessee.
Liability of the Legal Representative
Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. However, the liability is generally restricted to the value of the estate inherited from the deceased and does not ordinarily extend to the personal assets of the legal representative. Therefore, the legal representative is not expected to discharge the deceased’s tax liabilities from his or her personal resources merely because of the representative capacity.
Continuation of Assessment Proceedings:
- Any tax proceeding initiated against the deceased before death will be deemed to have been initiated against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased.
- Any proceeding that could have been taken against the deceased if they had survived, may be taken against the legal representative
- All provisions of this income-tax Act will apply to the legal representative accordingly.
When legal representative can become personally liable
If a legal representative disposes of, transfers, or otherwise parts with assets of the deceased’s estate before settling outstanding tax liabilities, he or she may become personally liable for the unpaid taxes. Such personal liability is restricted to the value of the assets improperly dealt with.
How many Returns are to be filed
In case income is upto the death of the Assessee:
First Return is to be filed by the legal representative for the period starting from the First day of the financial Year to the date of death of the assessee.
In case Income continues after Death of Assessee:
Second Return is to be filed by the executor of the will of deceased person for the income earned by the deceased (such as Rent, FD Interest, Business Income from Inherited Assets) from the date of death up to the end of the financial year, until the assets are distributed. If there’s no will, assets passed under succession law and legal heirs file the tax return.
Refund of Excess Taxes Paid
As the legal representative is held liable to pay tax on behalf of the deceased, on the same lines he will also be entitled to claim any refund due to the deceased. All he/she is required to do is to fill up the details of joint bank account while filing the income tax return of the deceased person. If there is no joint account, then bank details of the legal heir shall be given. After the completion of the verification process by the jurisdictional Assessing Officer, refund will be issued.
Consequences of Non-Filing of Income Tax Return
If the legal representative fails to file the Income Tax Return of the deceased, he/she will be held responsible for non-payment of dues of the deceased and penalty proceedings can be initiated against them.
Surrender of PAN
PAN of the deceased person must be surrendered only after doing the following activities:
- Close bank accounts
- Transfer the Assets
- File pending Returns and Pay the pending taxes
- Receipt of a refund, if any.
The Legal representative should write a letter to Assessing officer mentioning the details of deceased person like name, PAN, Date of birth, reasons of surrender and copy of death certificate.
Conclusion
Understanding tax responsibilities after the death of a taxpayer is essential to ensure that legal obligations are properly discharged without disruption to the tax system. The law provides that such responsibilities do not cease with death but are transferred to the legal representative, who is required to complete pending assessments and discharge tax liabilities out of the deceased’s estate.
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For any further information or clarification, the author can be reached at cashubhikhandelwal@gmail.com
Disclaimer: This document is intended for knowledge sharing purpose only. The information contained in this article is published for the knowledge of the recipient but is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient. Whilst due care has been taken in the preparation of this article and information contained herein, the author will not be responsible for any errors that may have crept in inadvertently and do not accept any liability whatsoever, for any direct or consequential loss howsoever arising from any use of this article or its contents or otherwise arising in connection herewith.
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