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

Even if a person dies during the year, if he or she made any income during that year, he or she must file income tax reports. Any individual who earns an income that is above the minimum amount that is exempt from the levy of income tax is required to pay income tax and file an income tax return under the Income Tax Act.

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

The solution to this issue is found in Section 159 of the Income Tax Act, which states that it is the legal successor of the deceased’s responsibility to submit income tax returns and pay any income tax due on his or her behalf.

For Income Tax, the legal heir would be considered the assessee, and all of the requirements of the Income Tax Act would apply to him in the same way as they would to the deceased assessee.

The legal heir must first register as the deceased’s legal heir on the IRS website, after which he or she can file the ITR on the deceased’s behalf.

Computation of Income of the Deceased

The deceased’s income would include all earnings from the beginning of the year until his or her death. In the hands of the legal heirs, any income derived from assets inherited from the deceased is taxed.

For example, Mr A earned Rs. 80,000 per month as Interest from Fixed Deposit and he expired on 30th Nov. In such a 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

The legal heir is responsible for filing the deceased’s income tax return and depositing the remaining income tax due (if any).

If a notice was sent to the deceased before his death, the notice’s actions against the legal heir can be maintained from the date of the deceased’s death. On behalf of the deceased, the legal heir is individually liable for all taxes. The deceased is responsible for any penalties, interest, or other amounts owed to the Internal Revenue Service.

The sum payable to the Income Tax Authorities on behalf of the deceased by the legal heir shall not, however, exceed the assets inherited by him. To put it another way, the legal heir is not liable for paying the fees out of his cash.

Refund of Income Tax

If an income tax refund is due, the refund will be processed following the Act’s normal requirements. It is always preferable to receive a refund in a joint account in which the deceased was a joint holder with any other person, as this allows the money to be used quickly.

If there is no joint holder, the account can be operated by the nominee named by the deceased. If there is no nominee, the account can be operated by the deceased person’s heirs.

Documents to be uploaded for Legal Heir Registration

All of the following documents must also be presented at the time of legal heir registration:

• Copy of Death Certificate
• Copy of PAN Card of the deceased
• Self-attested PAN card copy of the legal heir
• Legal Heir Certificate or Affidavit in the presence of a Notary public

Any of the following papers can be submitted as proof of legal heirship to obtain a Legal Heir Certificate:

• The legal heir certificate issued by the Court of Law
• Surviving Member Certificate issued by the Local Authority
• The family pension certificate issued by the State/ Central Govt
• Letter issued by the Banking or Financial Institution on their letterhead, with official seal and signature affixed stating that so and so holding PAN(s), was/were the nominee(s) of the deceased to the account/instrument(s) held in the name of the deceased with the institution and the same was not withdrawn till the death of the deceased

Affidavits for Legal Heir Registration were once accepted, however they are no longer accepted.

Following the submission of these documents, an application will be sent to the Income Tax Authorities, who will analyse the materials and accept or reject the application. An email is sent to the registered email address with the approval/rejection data.

Other Relevant Points

• The HUF would continue to exist even if the Karta of the HUF died, and the wealth made by the HUF would continue to be taxed in the hands of the HUF even after his death. After the death of the Karta, the HUF’s most senior member would become the Karta, who would file the return.
• Except for the changes indicated above, there will be no additional charges in the way taxes are computed, filed, or ITRs are issued. The deceased person’s return would have to be filed in the same format and at the same time as the living person’s return.
• The legal heirs can potentially be subjected to penalty proceedings. The legal heir’s liability, on the other hand, would be limited to the assets he acquired from the deceased.
• If there is just one legal heir, that person can function as a legal representative for income tax purposes.
• If there are many legal heirs, they should designate one of them as the legal heir to submit the Income Tax Return. If they all desire to be registered as legal heirs for income tax purposes, they can file a combined return in the capacity of an AOP (Association of Persons) or a BOI (Board of Inquiry) (Body of Individuals).