Whether Life Time Pension Arrear Taxable In The hands of Legal heir?
October 28, 2007 by taxworry · Leave a Comment
Pension is defined as salary under section 17 of the I T Act. The life time pension arrears actually accrues to the pensioner who died but could not receive. Under the pension rule, a pensioner has to nominate a person who will receive arrears of pension till the day of death. In case , nomination is not there ,legal heir can claim such arrears.
The life time pension arrears is therefore just a pension, being received on behalf of deceased person. Hence,in my view the arrears payment of pension in hand of legal heir is taxable . The provision applicable for assessment should be section 159 of the I T Act.
Under section 159 , the income which accrued to the deceased during his life time ,but could not be received by the deceased , his legal representative will be liable for tax on that part of income. Therefore , for that part of income , his/her legal representative will be
assessee . Section 159 of the I T act is given as under :
159. (1) 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.
(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),
(a) any proceeding taken against the deceased before his death shall be deemed to have been taken 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;
(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
(c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
Therefore, in you case , you should file two returns as under;
- One return for the deceased in the ward/office he(deceased) used to file the return as ‘ Smt.ABC Legal Heir of Late XYZ ,” fro Rs 0.89 and other income which accrued e.g interests etc.
- Another one -her own return for Rs 3.2 lakhs in the ward/office she was always filing.
In simple words, the income which accrued to the deceased before he died is not income of the legal representative , but he/she is only liable to tax on the income of deceased because that [part of income has been received by him/her. The assessment of the income of deceased shall be as if the deceased person is alive for the purpose of I T Act. For that reason, the Life Time Arrear Pension , shall be shown as salary income .
Note: Do not confuse with family pension. The family pension is taxable in the hand of recipient under the head “income from other source”
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