Legal heir bound by law to file deceased's tax return for year of death

Failure to do so can result in penalties for the legal heir

A person with a total income exceeding the basic exemption limit must file an income-tax return (ITR) under the Income-Tax (I-T) Act, 1961. This obligation must be fulfilled even in case of a person’s death.  

Deepak Jain, chief executive, TaxManager.in, says, “The legal heir must file the ITR on behalf of the deceased person as his representative. To do so, the heir must register himself as a representative on the e-filing portal.”

Registration and approval

While applying, the representative needs to include a few details about the deceased, along with a few important documents: the deceased's PAN card as well as the legal heir’s, a certificate of heirship from a court or local tax authority, and the deceased’s pension certificate.

The legal heir’s request is reviewed and approved by the e-filing administrator.

If ITR is not filed

If an ITR is not filed or the tax due is not paid on the deceased person’s behalf, there can be penal consequences.  

Suresh Surana, founder, RSM India says, “If the legal heir doesn’t file the ITR on or before the due date specified in Section 139 of the I-T Act, a penalty under Section 270A would be imposed, equivalent to 50 per cent of the tax avoided by the taxpayer. He could also be prosecuted under Section 276CC.” Section 276CC provides for imprisonment in case of failure to file ITR.

Maneet Pal Singh, partner, IP Pasricha & Co says, “Late fee under Section 234F will be levied on non-filing of ITR along with interest under Section 234A. Also, assessment for escaping income could be initiated under Section 148, if that happened.”

Under Section 234F of the I-T Act, an ITR filed after the deadline leads to a penalty of Rs 1,000 (for those having income of up to Rs 5 lakh) or Rs 5,000 (for income above Rs 5 lakh). Section 148 deals with issuance of notice to the taxpayer.

Naveen Wadhwa, deputy general manager, Taxmann, says, “The legal representative’s liability is limited to the extent to which the estate is capable of meeting the liability. However, the legal representative is personally liable to the extent of the value of any asset of the estate which he disposes of, or creates a charge on, while the tax liability remains undischarged.”

Two ITRs must be filed

Two separate ITRs must be filed for the year of death. Surana says, “One ITR has to be filed by the legal heir for the deceased person’s income from the beginning of the financial year till the date of his death. The second ITR has to be filed by the executor on income earned by the deceased’s estate for the period from the date of death till the time the assets under the estate are distributed to the legal heir.”

Once the assets are distributed, income generated by them is considered the legal heir’s income.

Pay heed to these points

Filing ITR is useful in several circumstances. Jain says, “If a person passes away in the middle of a financial year, an ITR should be filed by the legal heir as it also acts as proof of income at the time of insurance claim.”

The legal heir is liable for any error in the ITR. Wadhwa says, “The legal heir must collate all the data before filing the return. If there is any error or omission in the original return, the return can be revised at any time three months before the expiry of the relevant assessment year or before the completion of assessment, whichever is earlier.”

Even a belated return can be revised, and there is no limit on how many times this can be done.

If the legal heir’s total income, including the deceased’s income from the date of death, exceeds Rs 50 lakh, the legal heir must provide details of all the assets and liabilities held by him at the end of the financial year in Schedule AL. Also, the deceased’s PAN card must be surrendered after filing ITR.

How to register as legal heir

• Log on to the income tax e-filing portal: https://bit.ly/3aQJRLS

• On the ‘Authorised Partners’ tab, select ‘Register as Representative’

• Click on ‘Let’s get started’

• A new dialogue box will appear: ‘Category of assessee who you want to represent’; select ‘Deceased (Legal Heir)’ option

• Enter details such as name, PAN, date of death, bank account details of legal heir, reason for registration, etc.

• Attach the necessary documents

• After filling the details, click on ‘Proceed’, ‘Verify the request’ and then ‘Submit request’

Source: RSM INDIA