Last updated: March 4th, 2020 3:02 PM

Income Tax of Deceased Person

If a deceased person had taxable income in the financial year, income tax must be paid and the income tax return must be filed by the legal representative or legal heir. The term legal representative refers to “the name given to describe the executor, administrator or the person who looks after another person’s affairs”. On the death of a person, the legal heir or legal representatives would become liable for the filing of income tax returns and payment of any tax, which the deceased would have been indebted to pay. In this article, we discuss the applicability of income tax on a deceased person.

Procedures to be Initiated

In order to make an assessment of the income of the deceased, and for the purpose of imposing any sum in the hands of the legal representative, the following procedure would apply:

• Any proceeding initiated against the deceased would be deemed to have been initiated and continued against the legal representative.
• Any proceedings which would have been processed against the deceased will be processed against the legal representatives.
• The legal representative of the deceased would be deemed to be an assessee.
• The liability of the legal representatives would be confined to the extent to which the estate of the deceased is capable of meeting the liability.

Computation of Tax Liability

The computation of income of the deceased person estate should be made granting all reliefs which the deceased may be entitled to and calculating the deductions, allowances and rebates that the deceased may be entitled to in respect of that status, and finally levying the tax at the average rate applicable to the deceased. Based on the total income calculated, income tax must be paid and tax return should be filed by the legal heir or legal representative.

Liability of Legal Representative

Given an instance where the legal representative creates a charge on or disposes of, or parts with any asset of the estate of the deceased, while the liability for tax on the income of the deceased remains un-discharged, the legal representative would be personally liable for any tax payable by him in his capacity. However, the liability is limited to the value of the asset charged, sold or parted with. It may be noted that that the personal liability according to this provision is limited to the taxable amount, excluding interest/penalty or any other sum. It is also implicit that a legal representative will be penalized for any default committed by the diseased. A penalty imposed on the diseased prior to his/her death may be demanded from the legal representative and collected out of the estate. However, a legal representative wouldn’t be prosecuted for any defaults under this Act. Hence, the legal heir or legal representative would be liable for the payment of taxes only upto the value of assets left by the deceased person.

Notice to Legal Representatives

In a situation where notices of income assessment are only sent to one of the legal representatives of the deceased out of many, it would lead to a procedural irregularity which is liable to be corrected. Such an assessment order would neither be considered void nor annulled.