Summary of this article
If there are multiple heirs, only one of them, usually the major legal heir, should take up the responsibility of filing the ITR. Moreover, there are some key factors one must keep in mind:
Filing is compulsory if the deceased had taxable income.
Registering as a legal heir on the portal is the first step before filing.
Liability is capped at the value of assets inherited.
Many taxpayers may not know, but sometimes it is important to file an income tax return (ITR) on behalf of the deceased person. When a person passes away, it doesn't mean the financial matter closes automatically - one of the key responsibilities that falls on family members is filing the deceased person's ITR if there is taxable income earned up to the date of death.
The law treats this quite straightforwardly. Section 159 of the Income Tax Act, 1961, says that the legal heir becomes a "representative assessee" and has to take on the responsibility of filing. However, this does not mean that the heir is liable beyond their inheritance; the tax dues can only be recovered to the extent of the assets received from the deceased.
When the return must be filed
Saya CA Ashish Niraj, Partner A S N & Company, chartered accountants, "If the deceased had any taxable income in any Financial Year till the date of his death, his legal heir will be required to file his ITR and discharge his tax liability. Here, the maximum tax liability which he is required to pay is his share of assets received as a legal heir."
The ITR is mandatory if the total income of the deceased (till the date of the death in that financial year) crosses the basic exemption limit. For instance, in case someone had a salary income, profit from business, earnings from a rental property, or capital gains before they passed away, the same should be reported in the ITR on their behalf.
The return is essentially filed in the same way as for any living individual. The difference is that it is submitted by the heir in the capacity of representative assessee.
How do you calculate their income?
The legal heir has to calculate the income from the start of the financial year until the date of death. This is not always simple, because one has to look at bank statements, investments, Form 26AS, Annual Information Statement (AIS) and any other financial records.
Any income earned after the date of death, say interest from bank accounts, dividends from shares, or rent from inherited property, becomes the legal heir's own income and is taxed in their personal return, not in the deceased person's return.
Would deductions still apply?
Yes, says CA Niraj, "All deductions available to a normal assessee will be available to the legal heir at the time of filing ITR of the deceased."
What if there are multiple heirs?
Explains CA Niraj, in case of multiple legal heirs one of the major legal heirs should register as Legal Representative and file ITR and discharge liability,if any. "Otherwise all legal heirs who got assets of the deceased will be liable for penalty proceedings," he notes.
This means that before the ITR can be filed, the heir has to register themselves on the income tax portal as a legal representative of the deceased individual. This would involve logging in with their own PAN details and submitting the required documents.
The tax department typically verifies this within a week and once approved, the heir can assess the deceased's profile through their own login and file the return in the normal way.
What to remember
Filing is compulsory if the deceased had taxable income.
Liability is capped at the value of assets inherited.
The ITR should only cover income until the date of death.
Any income from inherited assets afterwards must be declared in the heir's own return.
Registering as a legal heir on the portal is the first step before filing.
