Loss of a family member causes stress not only emotionally but financially too. While families are dealing with their personal loss, taxation may get neglected. The one most frequently asked question is, “who will pay the income tax after a taxpayer’s death?”, People usually think that their tax liabilities get automatically canceled once they die. But, according to the Indian taxation system, the tax liabilities of a dead taxpayer continue in the hands of the legal heir or legal representative of the dead taxpayer. Thus, having knowledge about the ITR Filing for Deceased Person would save families from penalties, notices, and future legal complications.
Does Tax Liability End After Death?
No, the legal representative will be responsible for the tax affairs of the deceased in terms of Section 159 of the Income Tax Act. Which says:
- Pending Tax returns are to be filed
- Reply to Tax Notices
- Pay the taxes due
- Getting the eligible tax refunds
But there is one big safety valve. Generally, the legal heir is liable only for the amounts inherited by him from the deceased. In general, the Income Tax Department does not have the power to recover tax dues of the deceased from the personal assets of the legal heir.
Who Pays the Outstanding Tax?
Taxes are paid by the legal heir of the deceased taxpayer. Payment is usually made from the estate of the deceased such as:
- Balances in bank accounts
- Fixed Deposits
- Shares and Mutual Funds
- Sale of property
- Other inherited property
Example
If Mr. Sharma had died in November 2023, and before his death, he earned:
- Salary: Rs 8 lakhs per annum
- Interest Income Rs. 70,000/-
The tax calculation results in a liability of Rs. 42,000. His daughter will be liable to file ITR of Deceased Person & pay the tax due from the assets inherited as legal heir. If there’s enough money in the estate she wouldn’t have to pay from her own income.
Income Before Death vs Income After Death
And that’s where a lot of taxpayers get stuck.
- Income Earned Before Death
Income earned from the commencement of the financial year up to the date of death shall be taxed in the hands of the deceased. This includes:
- Salaries
- Pension
- Income from trading
- Interest received
- Sale of Capital Assets
- Rent Receipts
Such income must be disclosed through ITR Filing for Deceased Person.
- Income Earned After Death
After death earnings are handled differently. For example:
- Interest earned on Fixed Deposit after death
- Rental income from inherited properties
- Dividends received after death
- Capital gains
- Property inherited
Generally, the income is taxable in the hands of the legal heir or beneficiary or executor if the income is received by the legal heir or beneficiary or executor.
Practical Example
Mrs. Gupta died on 30th September 2025. Before she died, she earned:
- Pension- Rs 4 lakh
- Interest- 60000
This income is reported on the return of the deceased. After her death, the property earned Rs 1.2 lakh as rental income. The income of the deceased shall be reflected in the ITR of the legal heir and not in the ITR of the deceased.
How Does ITR Filing for Deceased Person Work?
The process is the same as filing of regular ITRs with some additional steps.
Step 1- Be a legal heir: Legal representative should be registered as Legal heir on income tax portal.
Step 2- Upload supporting documents: The documents asked for are:
- Death Certificate
- PAN of the deceased
- Pan of the Legal heir
- Legal Heir Certificate/ Succession Certificate
Step 3- Calculate Taxable Income: Determine income of deceased as of date of death.
Step 4 – Pay tax due: You must pay the taxes you owe before you file your return.
Step 5- File the Return Electronically (eFiling): Using the PAN details, do ITR Filing for Deceased Person and verify the return as the legal representative.
What About Tax Refunds?
Your tax refund outlives you. If the legal heir has paid excess tax in the form of TDS, advance tax or self-assessment tax he can file the return and claim refund.
Example
The retired taxpayer had bank interest income Rs. 20,000 which was subjected to TDS. Rs. 5,000/- payable as final tax liability. Rs.15,000 balance can be claimed back as a refund through ITR filing of the deceased.
What Happens to Pending Tax Notices?
If the deceased taxpayer had:
- Assessment procedures
- Notice of scrutiny
- Payable tax demands
- Appeals
The deceased is the responsibility of the legal heir. Tax proceedings do not end with the taxpayer. The legal representative shall appear on behalf of the taxpayer and shall attend to the procedures in progress.
Common Mistakes Families Should Avoid
Don’t make these common mistakes to ensure smooth compliance:
- Ignoring the last tax return
- Delaying legal heir registration
- Missing tax notices
- Mixing Income before death and income after death
- Failure to report interest and investment income from bank accounts
- Failure to claim eligible refunds
Such errors may lead to unnecessary notices and delays.
Conclusion
Even after the death of a taxpayer, their tax liabilities do not end. Instead, the tax liability falls on the legal heir, who will have to address all issues relating to taxes, complete the ITR Filing for Deceased Person, and pay off any tax arrears that may be there from the estate left behind by the deceased. This is important to note because the principle here is straightforward: any income earned prior to the death is taxable in the name of the deceased whereas any income earned after death is taxable in the name of the heir/beneficiary.
FAQs
Q1. Do I need to file ITR for the deceased?
Yes, if the deceased had a tax compliance obligation or taxable income for the financial year the deceased died.
Q2. Refund of tax to the legal heir of the deceased?
Yes, once done the legal heir can claim the due refund.
Q3. Tax notices can be issued to a taxpayer even after his death.
Yes. The legal heir shall be liable for the deceased and such pending proceedings may be continued.
Q4. Who pays any outstanding taxes upon the death of a taxpayer?
The legal heir is taxed on the estate and inherited assets of the deceased person.
Q5. Does the deceased final return include income earned after death?
No, income earned after death is taxed to the heir, beneficiary or executor receiving it.
Moreover, if you want any other guidance relating to the ITR filing, please feel free to talk to our business advisors at 8881-069-069.
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