legal heirThe unfortunate situation a family may face when an earning person suddenly expires . In such tragic situation , one more problem is of tax compliance. As per the law , it  is the duty of legal heir to comply with filing of tax return related to income earned by the deceased family member before his death and certain  income which may be earned  after the event of death. Then , there may be cases that the property of the deceased could not be partitioned among heirs and the income from such a property  is still being earned  . This post is to present solution to deal with such confusing situations as far as compliance with tax laws are concerned . So, just read to know how to handle income tax issues in such unfortunate event of death of earning family members ? 

1. Are there specific provisions for dealing with income of deceased person?

Yes, Income Tax Act provides two express provisions under section 159  and  section 168 for assessment of income of a deceased person.

Section 159 of the Income Tax Act provides the answer to the question ” Who will be responsible for filing or return and compliance?”  In other words , for the purpose of I.T.Act section 159 provides meaning of  Legal Representative  in whose hand assessing officer will assess the income of the deceased person.

Section 168 of the I T Act defines Executors who will be assessed in case of income from estate of deceased person.

2. Who should file the return of income of deceased person?

In case of deceased person generally the income has to be categorized in two period-the first one is income earned when he/she was alive and second is after his/her death.

  • Situation 1: Income which was earned during the life time of deceased person should be assessed in hand of legal representative(s) as per section 159 of the I T Act. Therefore, in such case, legal representative should file the return of the deceased person. For example, let us say, a person who was earning salary of Rs 10 lacs dies in the month of April2012, then the return of income for the FY 11-12 (Asst.Yr 2012-13) should be filed by his legal representatives as per section 159 of the I T Act.
  • Situation 2: The income was earned after the death of the assessee from the assets owned by deceased and which has not be distributed among heirs. In case , the deceased has left a will and has appointed an Executor , the executor shall be filing the return .In this case , provision u/s 168 of the I T Act is applicable. Please note that in case will is not left, the Income Tax Act is not clear and in opinion of, the legal representative should file return of income .

3. Who is/are Legal Representatives of Deceased Person?

Legal representative is defined u/s 2(29) of the I T Act as having same meaning as is assigned to it in clause (11) of section 2 of the Code of Civil Procedure 1908 which states

“means a person who in law represents the estate of a deceased person, and includes any person who inter meddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued;”

In practical terms, the heir himself if there is only one or if there are more than one heir, should first make an agreement among different heirs so that others assign one person as legal representative for the purpose of income tax matter. That person can sign the return of the deceased person and can appear before the assessing officer in case of any proceedings.

4. What should be the name on the return for deceased person?

The return should reflect the name of the Legal Representative or executor as under:

1. Sri XXXXXXX , L/H of Late ABCD in case of section 159 (case 1 above)
2. Sri XXXXXXX, Executor of the Estate of Late ABCD (case 2 above)

5 . In what status should the return of deceased person be filed?

If there is one legal representative, he/she can file the return in individual capacity and in case there is more than one heirs , the return should be filed in status of association of person (AOP) or even body of individuals (BOI) as the case may be.

6. Who are liable to pay tax on income of a decease person?

If we read section 159(4) ,161 and 167 in case of legal representatives , it is clear that:

  1. Legal representatives are liable to pay tax to the extent of their personal liability.
  2. As per section 167 , if one legal representative pay on behalf of other heirs, he/she has legal right to recover such amount from other heirs. For this he can even deduct the amount from the share of other heir in whose behalf he had paid the tax.
  3. Similarly executor are also responsible to pay tax but he is also having right to recover the tax from the person on whose behalf he , in capacity as , executor is paying tax.(Refer section 169 & 162).

7. How to eFile Return as Legal Heir?

Income Tax Department’s e-Return filing website has given the revised process of filing e-Return in cases where the assessee has expired but a return has to be filed . Fby Legal Heir using his Digital Signature Certificate. Following process is suggested in above regard :

Steps involved in Legal Heir Registration – New Request

  • Step 1 – Login to e-Filing portal using Legal Heir Credentials
  • Step 2 – My Account à Register as Legal Heir
  • Step 3 – Select the Type of Request – New Request
  • Step 4 – Enter the details of Deceased
    • PAN
    • Date of Birth
    • Surname
    • Middle Name
    • First Name
  • Step 5 – Select the files to upload
  • Step 6 – Attach a Zip File with the below scanned documents
    •  Copy of the Death Certificate
    • Copy of PAN card of the deceased
    • Self-attested PAN card copy and
    • Legal Heir Certificate Or Affidavit in presence of a Notary Public
  • Step 7 – Click Submit

What  documents will be accepted as Legal Heir certificate.

  1. The legal heir certificate issued by court of law
  2. The legal heir certificate issued by the Local revenue authorities.
  3. The certificate of surviving family members issued by the local revenue authorities
  4. The registered will
  5. The Family pension certificate issued by the State/Central government.

After , you submit all document, the e-Filing Administrator may approve as Temporary Legal Heir ( who could not submit all five documents related to deceased as given above ) or Permanent Legal Heir, based on the documents uploaded. An e-mail is sent to the registered e-mail ID with the details of approval / rejection.

Everything after that will take place as if the return is filed by an assessee and no new or exceptional process is for a return by a legal representative.

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