How to File Income Tax Return for the Deceased by the Legal Heir

Did you know that deceased people can also be taxed? As ironic as it sounds, the income tax returns for a deceased person have to be filed if he/she has taxable income. His legal heir/representative needs to file the return on his behalf for the income earned till the date of death. The legal heir has to register himself at the income tax website to file the return on behalf of the deceased. In this article, we will discuss how to file the income tax return for the deceased by a legal heir.

Who is a legal heir?

From the viewpoint of the law, a legal heir is a person who represents the deceased's assets. Any of the following documents are acceptable as legal heir certificates when registering as a legal heir:

• The certificate of legal heirship is issued by a court of law.
• The certificate of legal heirship is issued by the local revenue authority.
• The certificate is issued by the local revenue officials to the remaining family members.
• The deceased person's registered Will.
• The State/Central government's family pension certificate.
• The certificate of surviving family members issued by the local revenue authorities (Municipality, Nagarpalika) is the most common certificate available. Because this certificate is typically issued in a regional language, the legal heir must translate it into English/Hindi and have it notarized.

Register as a legal heir

The legal heir has to register at the income tax website as a legal heir.  For this, we should know who the legal heir is and the procedure to register as a legal heir on the government income tax website. 

Registration as a legal heir is mandatory for the e-filing of returns on behalf of the deceased person. The PAN of both the deceased person and legal heir should be registered in the e-filing portal. However, if the deceased person's PAN is not registered, then the legal heir can register on behalf of the deceased. Following are the steps for the registration of a legal heir: 

Step 1 – Go to the income tax department e-filing portal. Log in to the e-filing portal using your user ID and password.

Step 2 – Go to ‘Authorised Partners’ > ‘Register as Representative’ and click on ‘Let’s Get Started’.

Step 3 –   Click on ‘Create New Request’.

Step 4– Select the category, enter the PAN details, date of death, and the reason for registration.

Step 5: Upload the required documents

Step 6– Click on the ‘Proceed’ and ‘Verify the Request’ button.

Step 7– Click on ‘Submit Request’, and you will get the acknowledgment from the department.

Note: The legal heir should mandatorily provide the ‘Reason for Registration’ as a representative assessee.

Documents required to file ITR on behalf of a deceased person

Copies of the following documents are required:

• Death Certificate.
• PAN Card of the deceased.
• Self-attested PAN card copy of the legal heir.
• Legal Heir Certificate (as described above).
• The order is passed in the name of the deceased if applicable.

The size of the zip file must not exceed 5 MB.

Registration approval process

After completing the above process, the legal heir request is sent to the e-filing administrator. The e-filing administrator will verify the request and approve/reject it as applicable. Once the request is approved, one can use all services for the legal heir and for the deceased. 

If the request is rejected, the intimation for rejection would be received by a valid reason for such rejection. The reasons could be the upload of incorrect information or documents, etc. Accordingly, the legal heir should take the necessary action to rectify such rejection.

Once approved, you can access the deceased taxpayer's income tax e-filing account within your income tax login. You can change Logged in as from Self to As a Legal Heir or representative after which you can access all the information of the deceased taxpayer and file the ITR also.

File ITR as legal heir

Once the request for registration as a legal heir is approved, you can file a return as a legal heir on behalf of the deceased. ITR can be filled in the normal way and in the standard procedure which is followed by an individual person while filling his own return. 

Thus, the return would be e-verified using various methods, such as Aadhaar OTP, net banking, etc., or it can be verified by the legal heir who can sign the ITR Acknowledgement, and a copy of the same can be sent to Central Processing Centre (Bengaluru).

Calculate the income of the deceased

As a legal heir, you have to file the return on behalf of the deceased for income till the date of death. Calculate the income of the deceased from the start of the year till the date of death, and thereby the tax payable on it in the same manner as if the deceased is alive. If you don’t know the exact income, then you should refer to bank statements, investments and other relevant documents necessary for income tax calculation. 

Any income earned after the date of death from the assets inherited from the deceased is taxable in the hands of the legal heir. The legal heir should include this income inherited from the deceased in his own income while filing his/her own income tax return.

Tax calculation of the deceased with an example

Neelima, who has a rental income of Rs 30,000 per month and an interest income of Rs 10,000 per month, dies on 20th Sep 2023. Her legal heir needs to file the return on behalf of Neelima for the period 1st April 2021 to 20th Sep 2023.

The income to be included in the return of Neelima to be filed by the legal heir would be :

The income to be included in the return of legal heir for F.Y 2023-24 :

Property taxes can be claimed in the return of the deceased if he paid for them or of the legal heir if the legal heir paid them. A standard deduction of 30% is allowed to both on the rental income.

Tax liability of the legal heir

The legal heir is responsible for paying taxes liable on the Income tax return of the deceased. However, he is not personally liable for the taxes due. The liability of the legal heir is limited to the extent to which the assets he inherited are capable of meeting the liability. 

For instance, if a person receives Rs 8 lakhs as his share from his father’s property and his father's tax liability is Rs 9.5 lakhs, then he cannot be made liable to pay more than Rs 8 lakhs. The liability of the legal heir shall be limited to the value of the assets inherited.

Tax liability in case of penalty or demand

The legal heir is responsible for the tax payable and also for the other sum, i.e. penalty, fine or interest which the deceased would have been liable had he not died. It means that the penalty proceedings for default by the deceased can also be initiated against the legal heir. However, his liability would be limited to the extent of the assets inherited from the deceased.