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September 18, 2020

How can legal heir file ITR of person who has died recently?

by shivam jaiswal in Income Tax

How can legal heir file ITR of person who has died recently?

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. As COVID-19 left many of us working from home surrounded by our families and loved ones, it was inevitable that we started to think about how well we are prepared for our futures.

How does one tax an individual who dies during the year and what happens to the estate and liabilities which remains behind after his death? When a person dies, apart from assets and liabilities, there are other things too that get transferred to legal heirs. These include the responsibility to file the last income tax return on behalf of the deceased and surrendering the person’s documents like permanent account number (PAN) and Aadhaar.

Can the income of deceased be taxed?

The income tax return (ITR) needs to be filed for the income earned by during a financial year. Even if the person in question is deceased and such deceased has earned any income is the particular year, then someone has to file the ITR on his/her behalf.

Who will file the ITR on behalf of the deceased?

  • As per the Section 159 of the Indian Income Tax Act 1961, the legal heir is liable to file the ITR and pay the income tax dues, if any.
  • The legal heir of the deceased will be considered the assessee, liable to file the returns and pay the taxes of the deceased.
  • As applicable on the deceased assessee, all the Income Tax provisions will be levied accordingly on the legal heir.
  • The legal heir will need to register him/herself as the legal successor of the decedent online, on the income tax website.
  • This will allow him/her to file the ITR online on the behalf of the deceased.

What do you mean by a legal heir?

An heir is defined as an individual who is legally entitled to inherit some or all of the estate of another deceased person. Legal heir, in the eyes of law, is the person who represents the assets of deceased. 

How is income of the deceased computed?

The total earnings of the deceased from the start of the financial year till death will be counted as his/her total income. The profits earned by the deceased from the inherited assets are taxable in the hands of the legal heirs.

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How to register as a legal heir under Income Tax?

To Register as Legal Heir, perform the following steps:

Step 1 – Login to ‘e-Filing’ Portal www.incometaxindiaefiling.gov.in

Step 2 – Go to the ‘My Account’ menu located at upper-left side of the page > Click ‘Register as Representative’

Step 3 – Select the ‘Request Type’ as ‘New Request’ and Select the ‘Category to Register’ as ‘Deceased (Legal Heir)’ > Click ‘Proceed’

You will have to provide the following details:

  • PAN of the Deceased
  • Surname of the deceased
  • Middle Name of the deceased
  • First Name of the deceased
  • Date of Death
  • Bank account details of Legal heir

The user should select the ‘Reason for Registration’ if the date of death entered is for a period for which return filing timelines have lapsed u/s 139 and attach the following documents as attachments against the hyperlink provided for the same:

  • Copy of the PAN card of Deceased
  • Copy of the PAN card of the legal heir
  • Copy of Death Certificate
  • Copy of Legal Heir Proof from the below list
  • Legal Heir Certificate issued by Court of Law /Local Revenue Authority
  • Surviving family member certificate issued by the Local Revenue Authority.
  • Family Pension certificate issued by Central/State Government.
  • Registered will
  • Letter issued by the banking or Financial Institution in their letter head, with official seal and signature mentioning the particulars of nominee or joint account holder to the account of the deceased at the time demise.
  • Copy of the order passed in the name of the deceased (Mandatory only if the reason for registration is ‘Filing of an appeal against an order passed in the name of deceased’).
  • Copy of the order /notice (Mandatory only if the reason for registration is ‘Filing of return of income/form of period in which deceased was alive through condonation request’ (or) ‘A notice/order received from Income Tax Department in the name of the applicant for compliance on behalf of a deceased’)

Step 4 – Click ‘Submit’. A Success Message will be displayed confirming the submission of request to ‘Register as Legal Heir’.

What is the responsibility of the legal heir of the deceased w.r.t income tax compliance?

  • The legal heir is liable to file the ITR on behalf of the deceased.
  • The legal heir also needs to deposit any balance income tax which was payable by the deceased.
  • In case, the deceased person had received any notice before their death, then the legal heir will be responsible to carry out the proceedings after the death of the deceased person.
  • Even after death, the deceased is liable to pay any taxes, penalty or interest charged on him by the Income Tax Authorities.
  • The amount that the legal heir is required to pay on the deceased’s behalf shall not be more than the assets that he inherited from the deceased.

What is the procedure of return filing by a legal heir?

Once the request for registration as legal heir is approved, the legal heir can file the return on behalf of deceased by following the below mentioned process:

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

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

Step 3 – Login to e-filing portal using Legal heir credentials

Step 4 – Go to e-file and upload the return

Step 5 – Fill the following details and select the XML File:

  • PAN – Select the PAN of the deceased.
  • ITR Form Name – Select the ITR Form to upload (i.e. ITR 1, 2, …)
  • Select Assessment Year

Step 6 – Upload the XML File

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

Step 8 – Click Submit

It is also suggested that the legal heir should surrender the PAN card and get Aadhaar biometrics locked after they have completed other tasks like filing returns, closing bank accounts, redemption or withdrawal of financial assets and so on. These are the key identification documents of the deceased along with his death certificate even post his demise. One should not risk skipping the filing of income tax return after the death of a family member whose earnings fell in a taxable slab.

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