How to file Income Tax Return (ITR) after Death of Taxpayer?

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If a person dies during the year, and has earned some income during that year, it is necessary to file income tax returns even after his death. As per the Income Tax Act, income tax is to be paid, and income tax return is to be filed for any person who has earned an income which is above the minimum amount which is exempted from the levy of income tax.

However, there is one important question that arises:

Who will pay Income Tax and file Return after Death of a Person?

The answer to this question is mentioned in Section 159 of the Income Tax Act, which says that it is the responsibility of the legal heir of the deceased to file income tax returns and pay the income tax payable (if any) on behalf of the deceased.

For the purpose of Income Tax, the legal heir would himself be deemed to be the assessee and all the provisions of the Income Tax Act would apply accordingly to the legal heir as they would have been applied to the deceased assessee.

The legal heir would first be required to register on the income tax website as the legal heir of the deceased and then he/she can file the ITR on behalf of the deceased.

Computation of Income of the Deceased

All the income earned from the start of the year till death would be considered as the Income of the deceased. Any income earned from the assets inherited from the deceased is taxable in the hands of the legal heirs.

For example: Mr. A earned Rs. 80,000 per month as Interest from Fixed Deposit and he expired on 30th Nov. In such case, the Income computed would be as follows:-

Income in the hands of the Deceased:

Rs. 80,000 x 8 months = Rs. 6,40,000

Income in the hands of the Legal heir (to be disclosed in personal Income Tax Return of Legal Heir):

Rs. 80,000 x 4 months = Rs. 3,20,000

Liability of the Legal Heir

It is the responsibility of the legal heir to file the income tax return on behalf of the deceased and to deposit the balance income tax payable (if any).

In case there is any notice which has been issued to the deceased before his death, the proceedings of such notice can be continued against the legal heir from the date of the death of the deceased. The legal heir shall personally be liable to pay all taxes on behalf of the deceased. Any penalty/ interest or any other amount payable to the Income Tax Authorities shall also be paid by the deceased.

However, the amount payable to the Income Tax Authorities by the legal heir on behalf of the deceased shall not be more than the assets inherited by him. In other words, the legal heir is not responsible to pay the dues from his own pocket.

Refund of Income Tax

In case any Income Tax Refund is due, the refund would also be allowed in the same manner as the normal provisions of the Act. It is always better to receive the refund in a joint account in which the deceased was a joint holder with any other person so that the amount can be easily used.

If there is no joint holder, the nominee appointed by the deceased can operate the account. Where there is no nominee, the heirs of the deceased person can operate the account.

Procedure for Registration of the Legal Heir on the Income Tax Website

Step 1: Login to the Income Tax e-filing portal http://incometaxindiaefiling.gov.in/ using the Legal Heir Credentials

Step 2: Go to my account > Service Request type as shown below

ITR-filing-after-death

Step 3: Select Request type as New Request and Request Category as Add Legal Heir Request.

Step 4: Click Submit

Step 5: Select the type of request – New Request

Step 6: Enter the details of the deceased i.e. PAN No., Date of Birth, Surname, Middle Name, First Name.

itr-file-after-death

Step 7: Files to be uploaded

All the following documents would also be required to be submitted at the time of registration of legal heir:-

  1. Copy of Death Certificate
  2. Copy of PAN Card of the deceased
  3. Self attested PAN Card copy of the legal heir
  4. Legal Heir Certificate or Affidavit in the presence of a Notary public

For the purpose of Legal Heir Certificate, any of the following documents can be submitted as proof of Legal Heir Certificate:-

  • The legal heir certificate issued by the 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 Govt

In case none of the above mentioned documents are available, the legal heir can create an affidavit in the presence of a notary public duly signed by all the legal heirs, appointing him/her as the legal heir for the purpose of Income Tax.

On submission of these documents, a request would be sent to the Income Tax Authorities and after reviewing these documents – they will accept/ reject the application. An email is sent to the registered email id with the details of approval/ rejection.

Other Relevant Points

  1. In case of death of the Karta of the HUF, the HUF would still continue to remain in existence and the income so earned by the HUF would continue to be taxed in the hands of the HUF even after his death. The senior most member of the HUF would become the Karta and would file the return after the death of the Karta.
  2. There would be no other change in manner of computation of taxes or filing or ITR except from the ones mentioned above. The Return of the deceased would be required to be filed in the same format and at the same time as applicable to people who are alive.
  3. The Penalty proceedings can also be initiated against the legal heirs. However, the liability of the legal heir would be limited to the extent of the assets inherited by him from the deceased.
  4. If there is only 1 legal heir, he/she can act as a legal representative for the purpose of Income Tax.
  5. If there is more than 1 legal heir, they should appoint any one of them as the legal heir for the purpose of filing of Income Tax Return. In case they all want to be registered as legal heir for the purpose of income tax – they can jointly file the income tax return, they should file the return in the capacity of AOP (Association of Persons) or BOI (Body of Individuals).

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.