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Did you know that deceased people can also be taxed? As ironic as it sounds, the income tax returns for a deceased person has 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. Legal heir has to register himself at the income tax website for filing the return on behalf of deceased. In this article, we will discuss about how to file income tax return for the deceased by legal heir.

  1. Define legal heir
  2. Register as legal heir
  3. Registration approval process
  4. File ITR as legal heir
  5. Calculate the income of the deceased
  6. Tax calculation of the deceased with an example
  7. Tax liability of the legal heir
  8. Tax liability in case of penalty or demand

1.Define legal heir

Legal heir, in the eyes of law, is the person who represents the assets of deceased. To register as legal heir, any of the following documents are accepted as legal heir certificates:

a. The legal heir certificate issued by the court of law

b. The legal heir certificate issued by the Local revenue authorities.

c. The certificate of the surviving family members issued by the local revenue authorities.

d. The registered Will of the deceased person

e. The family pension certificate issued by the State/Central government.

The most common certificate available is the certificate of surviving family members issued by the local revenue authorities (Municipality, nagarpalika). This certificate is usually issued in regional language, so the legal heir is required to translate it into English/Hindi and get it duly notarized.

2.Register as 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 e-filing of return 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 PAN is not registered, then the legal heir can register on behalf of the deceased. Following are the steps for the registration of Legal heir:

Step 1 – Go to income tax department efiling portal.

Step 2 – Login to e-filing portal using legal heir credentials 

Step 3 – Go to My Account and register as Representative.

Step 4 –  

(i) Select the type of Request – New Request

(ii) Select the Add/Register as representative – “Register yourself on behalf of another person”.

(iii) Select the category to register as Estate of deceased.

Register as legal heir

Step 5 –

Fill the following details in the page appeared :

deceased information in the registration

The Documents required are as follows:

a. Copy of Death Certificate

b. Copy of the PAN Card of the deceased

c. Self-Attested PAN card Copy of the Legal heir

d. Legal Heir Certificate. (As described above)

The size of the zip file must not exceed 1 MB.

(iii) Click submit and you will get the Acknowledgement from the department with a transaction ID.

Below are the screenshot of the income tax website of the above process explained.

3. Registration approval process

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

Once the request for registration as legal heir is approved, you can file return as legal heir on behalf of deceased.

Following is the process for filing the return:

1. Download the ITR Form applicable to the deceased, fill the ITR Form and generate the XML File.

2. Go to Income tax website –https://incometaxindiaefilling.gov.in

3. Login to e-filing portal using Legal heir credentials

4. Go to e-file and upload the return

5. Fill the following details and select the XML File :

a. PAN – Select the PAN of the deceased.

b. ITR Form Name – Select the ITR Form to upload (i.e. ITR 1, 2, …)

c. Select Assessment Year

6. Upload the XML File

7. Legal heir can digitally sign the ITR of deceased using his Digital Signature Certificate

8. Click Submit

Login to Income tax e-filing

5.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 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. Legal heir should include this income inherited from the deceased in his own income while filing own income tax return.

6. Tax calculation of the deceased with an example

Neelima who has a rental income of Rs 30,000 per month and interest income of Rs 10,000 per month dies on 20th Sep 2017. Her legal heir needs to file the return on behalf of Neelima for the period 1st April 2017 to 20th Sep 2017.

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

Income from House Property
Rental Income
(From 1st April 2017 to 20th Sep 2017)
Rs 1,70,000
Income from other Sources
Interest Income
(From 1st April 2017 to 20th Sep 2017)
Rs 56,667

The income to be included in the return of legal heir for F.Y 2017-18 :

Income from House Property
Rental Income
(From 20th Sep 2017 to 31st March 2018)
Rs 1,90,000
Income from other Sources
Interest Income
(From 20th Sep 2017 to 31st March 2018)
Rs 63,333

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. Standard deduction of 30% is allowed to both on the rental income.

7. 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 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.

8.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 a 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.

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