Taxability of Income after death of Tax payer

 

Taxability of Income after death of Tax payer

 

During the deadly pandemic COVID-19  (even in normal time) , lots of person expired and his/her legal heir finding it difficult to understand how to file income  tax returns of the deceased person .

Unfortunately Income tax dept is not so kind or sympathetic towards bereaved family , and it is mandatory for  legal heir to file his Tax return .

 

The whole details are available in section 159 of the Income Tax Act, 1961 (Act). According to section 159 of the Income Tax Act, 1961 (Act), if a person dies, then his legal representatives shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the similar manner and to the same extent as the deceased.

 

 

This article is for the benefit of such person  and explains step by step the process.

 

First estimate if the deceased person has any taxable income during the financial year. If no, relax & forget the whole article/procedure.

 

If deceased person had taxable income, calculate the income upto his date of death . This income tax return will be filed under deceased person’s PAN , means it is his income.

For example if a person expired in Dec 20, estimate his income for 9 months only.

Income received after his death will be treated under two separate views :

 

Intestate View (ie Without a will)

 

Income of deceased person
It is important to note that all the income which is accrued or received from beginning of the financial year till the date of demise will be considered as the income of the deceased person and will be filed under his PAN.

 

 Tax on any income accrued or received from the assets that are inherited from the deceased will be borne by the legal heir himself. This would mean that after receiving the inheritance, any income accrued or received from the asset will be considered as the legal heir's own income and taxable under legal heir PAN.

However Money or property received by legal heirs by way of inheritance shall not be reported in income-tax return because Section 56(2)(x) does not apply to inheritance.

 

It is advisable for the legal heir to surrender the PAN card of the deceased person after submission of his last income-tax return and payment of tax dues or receipt of a refund if any. If any refunds are due on the name of the deceased person it is advisable not to close down the bank accounts of the same person. Especially if that person whose name is mentioned as the primary person in the books of income tax. Indeed, if there is a common account with the legal heir then it should not be an issue. 

 

How to file the IT return on behalf of the deceased IT Payee?

 

1) The first step is to get the Legal Heir Certificate. According to a law below documents, are considered as valid.

Legal Heir Certificate issued by a court.

Legal Heir Certificate issued by local revenue authorities.

Surviving family member certificate issued by local revenue authorities.

The registered WILL.

The family pension certificate, issued by State/Central Govt.

 

2) Calculate the income of the deceased (exactly like an individual calculation and there is no change in this process). Before proceeding further, collect the below details as a proof.

Collect all bank statements of a deceased IT payer.

Collect Form 16 and 16a.

This collection of bank statements and the Form 16 or 16A makes sure to tally the income.

Match with 26AS,TIS & AIS of deceased member.

 

3) Get the notarized affidavit for filing IT return on behalf of a deceased.

So documents required for filing IT Return on behalf of the deceased are as below.

a) Copy of Death Certificate

b) PAN Card copy of deceased

c) PAN Card of the legal heir (with self-attested)

d) Legal Heir Certificate

e) Notarized affidavit

 

Scan all above documents for uploading purpose.

 

4) Once you completed above steps then you have to file IT Return. There are two types to file. One is online and another is offline.

 

 

ONLINE PROCEDURE

Logon to Portal https://www.incometax.gov.in/iec/foportal/​  and go to my account to register yourself as a legal heir.

Go to the ‘My Account’ menu located at upper-left side of the page > Click 'Register as Representative'

Select the ‘Request Type’ as ‘New Request’ and Select the ‘Category to Register’ as ‘Deceased (Legal Heir)’ > Click ‘Proceed’

Provide the necessary details and upload the documents which I mentioned above.

Click on SUBMIT tab. The request will be sent to e-Filing Administrator.

 

e-Filing Administrator approve or disapprove after going through the details.

 

Notification will be sent to the registered email id of the legal heir.

Based on documents submitted IT Department allow you to file the IT return into two categories. One is a temporary legal heir. Because legal heirs failed to submit the legal heir certificate mentioned above. Such temporary legal heir can access the portal and upload the ITR/Forms, but unable to access all other services like add CA to submit audit forms (other than ITR) on behalf of the deceased.

 

The permanent legal heir (the one who submitted the valid legal heir documents) can file ITR/Forms or view status. He can use the portal exactly like an individual taxpayer. He can view Status of Income Tax Return/Forms, ITR-V Acknowledgment and other filing status of e-Filed, Returns/Forms in respect of the deceased or can also view the status of the request under My Request List menu, post Login.

Once, after approval of the application by e-Filing Administrator, legal heir can file IT return on behalf of deceased using legal heir login.

 

The legal heir should add his PAN Card in the verification part of IT form, validate, and generate xml of the return.

 

OFFLINE PROCEDURE

 

The legal heir must visit the concerned assessing officer (AO). Submit the documents,. After verification, AO will approve to file the IT return. Once the legal heir gets the approval, then he can file the return on his own or can take the help of tax experts. The name should be mentioned as “late (name of deceased) through legal heir (name of the person filing)”.

Overall, the process is not so simple and requires help of expert. If any member faces any issue , he /she can contact us .

 

FAQ :

I received some property / money after death of my husband , is it taxable in my hand:

 

Answer :  you are class 1 legal heir of your deceased husband.

Anything received either under a Will or as legal heirs is is treated as inherited. Since there is no inheritance tax here in India , so the money received by you on death of your husband is fully tax free in your hands without any limit. Since the money received by you as legal heir is not an income, you are not required to disclose the same in the ITR to be filed by you. However please note any income generated from such inherited property will be taxable in your hand.

 

 

 

Who is legal heir ??

 

Spouse is always treated as class 1 legal heir.

 

According to succession laws if a Hindu male dies without a will, the father is not his immediate legal heir.

 @Ajit Kumar Singh