All you need to know about filing a deceased kin’s ITR

The ITR has to be filed for income for the period that the deceased’s assets continue to generate income. This has to be done until such assets are distributed among the legal heirs or those named in the deceased’s will. After this, the income from these assets gets clubbed with the income of those inheriting the assets and is thereafter taxed in their hands.

So, how does one file tax returns for a deceased person and for how long? What happens if there’s disagreement among the surviving family members on who takes charge of filing the returns, or what if there is a delay in doing so? We reached out to chartered accountants (CAs) and lawyers to get their views on these questions.

Why is there a need to file the ITR for a deceased person?

Explaining the logic behind this, Rajat Dutta, founder & initiator, Inheritance Needs Services, says, “Death does not absolve the individual’s responsibility of paying income tax. Tax is collected on incomes earned under five specified heads, that is, income under salary, house property, profits of business and profession, capital gains, and other sources. After a person’s demise, income under these heads continue to attract tax.”

Unless all taxes and other dues are paid off, the deceased’s estate cannot be distributed among the legal heirs.

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Who can file such an ITR?

According to Dutta, the ITR for a deceased can be filed by a legal representative, who may not necessarily be an heir to the deceased’s estate. However, a legal heir can also be the legal representative.

A legal representative is an individual eligible to file IT returns satisfying any of the following five criteria:

One, in case of a registered will which has been confirmed as the last will (based on a probate by the court), the executor, or the person specified in the will can be the legal representative. Two, a legal heir named in the legal heirship certificate. Three, surviving family members having a certificate issued by the local revenue authorities. Four, a person (such as a spouse) holding a family pension certificate issued by the government. Five, a nominee or a joint holder to the deceased’s bank account having an officially sealed and signed letter from the bank or financial institution mentioning his /her details.

For filing a deceased’s tax returns, the legal representative has to first register himself on the Income Tax portal for this. Note that, as the legal representative is filing tax returns for the deceased’s income, his/ her tax liability will be limited to the extent of the deceased’s estate. “The legal representative’s personal income or assets are protected,” says, Dutta.

For what periods do ITRs have to be filed?

Let’s understand this with an example. Assume that a person died on 30 May 2022. Then, the ITR will have to be filed for financial year 2022 (1 April 2021 to 31 March 2022) by 31 July 2022. This is the period when the person was alive. For financial year 2023, two periods will be identified for taxation purposes—from 1 April to 30 May 2022 (when the person was alive), and second, the remaining part of the financial year (after the person died but his assets continued to generate income). Thereafter, the legal representative will have to continue filing the tax return every financial year until the deceased’s assets are transferred (distributed) to the heirs.

Mint spoke to two CAs, who said that, as per law, and with reference to the above example, one return has to be filed for FY 2022 and two returns for the two separate periods in FY23. However, one of the two CAs pointed out that since only one return can be filed for a financial year on the income tax portal, only one combined return is actually being filed for the two separate periods. According to him, this separation was done in the past when tax returns were filed in physical form.

What is the process of filing ITR?

Neetu Brahma, director, Nangia Andersen India, explained the process for filing a deceased’s ITR. First, you have to register yourself as the authorized representative of the deceased person using your own log in ID (PAN) and password on the IT portal. Then, the IT department verifies the documents submitted and either approves or rejects your request. If your request is rejected, you are intimated about the reason for rejection and you can take steps to rectify these. “The entire process is online and if the legal heir has all the documents in hand, then the process is very simple,” says Brahma.

After approval, you can file the deceased person’s tax return in a similar way as you would file your own return. But, the deceased’s ITR will be filed as a separate return in addition to the legal representative’s own ITR.

How can one deal with any delay in filing the deceased’s ITR?

“If you miss the due date for tax filing, then you can file a belated return, just as you would do for yourself if you missed the deadline. The legal heir is responsible for paying the tax and penalty, fine or interest. However, his liability would be limited to the extent of the assets inherited from the deceased,” says Brahma. What happens if you go past the belated return deadline too? According to Brahma, then the return can no longer be filed voluntarily by the legal heir and it has to be filed at the time of assessment, if initiated by the tax department.

Archit Gupta, founder and CEO, Clear, says, “The option to file condonation of delay in respect of tax filing is not yet open in the new ITR portal. However, this can be filed with the jurisdictional AO (assessing officer) of the deceased person by visiting them.”

How does a will impact the deceased’s tax liability?

“A valid will (free from any technical glitches) which is the last written and signed will of the deceased person is a ‘supreme umbrella document’. The executor (either mentioned in the will, or appointed by the court, if not mentioned) is responsible for ascertaining any liabilities (including income tax and penalty, fine or interest for delayed tax payment) outstanding as on date of death and discharging them before distributing the assets,” says Dutta.

Experts that we spoke with pointed out that in the absence of an executor (if there is no will), the surviving family members / legal heirs can choose one among themselves to register as a legal heir for filing the deceased’s ITR. Alternatively, if there is a dispute in the family, then they can approach the courts to appoint an executor / administrator for this role.

Can legal heirs claim credit for TDS (tax deducted at source)?

Any TDS deducted in the hands of the deceased after the date of death, can be claimed as credit by the person in whose hand the income is taxable. Until the date of death, it can be claimed as TDS in the hands of the deceased; from the date of death to the date of transmission of assets to the legal heirs, it can be claimed by the executor or legal heir; and after the date of transmission of assets, by the legal heirs.