THIS IS A VERY IMPORTANT POST. PLEASE PASS THIS ON TO NOKs. It is never late to learn, a veteran`s wife
who now happens to be a family pensioner received Income Tax Notice for Rs 60000 approx for AY
2010-2011 from IT Office. Most of us are not aware of the provisions in this reegard. Thanks to the Veteran who has shared this info with us all. We need to
educate our ladies on the subject...)-
INCOME TAX RETURN OF DECEASED
DEATH
of a dear one is an unbearable blow. Apart from the loss his family has to
confront issues relating to the transfer and distribution of the deceased’s
estate, which includes all his property, assets etc. Then there are tax issues
to be dealt with. These include filing of returns for income earned by
आगे पढ़ने के लिए यहाँ नीचे क्लिक करें.
the
deceased till the time of death, and helping the tax department with assessment
proceedings. What happens if the taxpayer dies before he or she files the
returns? Do returns have to be filed on behalf of dead person,who has to file
returns on behalf of dead person, how to file returns on behalf of dead person?
If there are tax liabilities who pays for them. Let’s start from the
beginning In the event of death of the assessee the income tax returns on
behalf of the dead person has to be filed. In case of a deceased person, the
the legal heir of the deceased person has to file income tax return for the
financial year. He has to register as a Legal Heir to do e-Filing on behalf of
the deceased.There is no change in Income tax computation and procedure of
filling income tax return. This article explains in
detail.
Filing
of income tax return after death
Even
when a person dies, the assessment of his income is to be done upto the time of
his death.This is for an individual and is covered under Section 159 of the income tax act. The legal
representative of the deceased has to file the income tax return for the income
on which the deceased. The income earned in the year of death is classified in
two categories:
·
Income
earned from April 1 till the date of death
·
Income
earned thereafter till the end of the financial year.
Usually,
spouse or close relative of the deceased takes charge as the legal
representative. Else, in case of will of the taxpayer who has passed away, the
executor is held responsible. The legal representatives will have to file
returns in the deceased’s name for income earned till the date of death.
Subsequent earnings are to be taxed in the hands of the legal
representative/executor of the deceased’s estate. So if an individual died on 12
June 2014, his legal representative will have to file on his behalf for the
financial year 2013-14 as also for the income for three months of 2014-15 in the
next assessment year. The only difference in filing return one self and by
legal assessee is that in case of alive assessee, he himself or through person
authorised by him files Income Tax Return whereas in case of deceased assessee
liability to file return and pay taxes is either on legal representative or
executor. Process of tax calculation, filing returns remains the same. How
to get the information, making senses of information to file the returns like
Bank accounts statements, Form 16, well that’s a battle or war that you would
have to fight.
Example
: Kirit inherits a fixed deposit (FD) of Rs. 10,00,000. Shruti inherits an
apartment from her father which was rented out. Interest received from the FD
and rent received from the apartment before the death would be taxed as income
of the deceased. The interest received from the FD and rent received from the
apartment after the death would be taxed in the hands of Kirit and Shruti
respectively. Our article On Inheriting,Tax of Property,Mutual
Funds,Shares,FD etc explains about inheritance in
detail.
Legal
representative has to register at the income tax website as Legal Heir with a
list of documents (explained here). If the request is
approved then he can file returns on behalf of the dead person.On the return,
the name should be mentioned as late (name of deceased) through legal heir
(name of person filing) ex LATE Mr / Mrs. _________ through legal
heir Mr / Mrs. _________
If
the karta of an Hindu Undivided Family (HUF) dies then as HUF is not a living
entity so death of the Karta does not lead to any change in taxation. The HUF
continues to be taxed as before and the senior most male co-parcener in the HUF
becomes the Karta.
Who
is Legal Heirs or Legal Representatives, Executor
Who
is Legal Representatives or Legal Heir? Usually, spouse or close relative of
the deceased takes charge as the legal representative. Else, in case of will of
the taxpayer who has passed away, the executor is held
responsible
If
there are many heirs, one of the heirs cannot assume himself as legal heir
unless declared so legally to file the return on behalf of the dead person.
Suppose, if other descendants do not have any objection right then, but later at
some point of time someone raises dispute about heir being not authorised? What
would be heir position to save from the case of cheating or fraud with the other
legal heirs as well as the IT department of the Government? Hence one needs to
obtain a Legal Certificate . Income Tax Authority expects Legal Heir
certificate or Affidavit in presence of a Notary Public. Following
documents are accepted as Legal Heir certificate.
·
1.
The legal heir certificate issued by court of law
·
2.
The legal heir certificate issued by the Local revenue authorities.
·
3.
The certificate of surviving family members issued by the local revenue
authorities
·
4.
The registered will
·
5.
The Family pension certificate issued by the State/Central
government.
In
practical terms , the heir himself if there is only one or if there is more than
one heir , should first make an agreement among different heirs so that others
assign one person as legal representative for the purpose of income tax matter.
That person can sign the return of the deceased person and can appear before the
assessing officer in case of any proceedings.
Executor
and Income Tax
Typically,
an executor is appointed through a will made by the deceased, and he administers
the estate as per instructions in the will. If the deceased hasn’t left a will,
the estate is administered in accordance with the law of succession. The
executor controls the estate of the deceased till the administration of the
estate is complete, that is, till all the assets are distributed to the
beneficiaries.
Tax
treatment of estate income. The estate could generate income before all the
assets are distributed. While such income accrues to the estate, it is taxed in
the hands of the executor from the time of the owner’s death till all the assets
are distributed. The executor pays the tax out of the income earned from the
estate. However, if some of the income is being distributed to legal heirs
before distribution of assets, such income is taxed in the hands of the legal
heirs. For tax purposes, the residential status of the executor is to be derived
from the status of the deceased in the year of death. For instance, the executor
would be a resident if the deceased was a resident in the year of death, and a
non-resident if the deceased was a non-resident in the year of death. Thus, if
the deceased was a non-resident, only the income earned in India would be liable
to tax in the country
Status
of the executor. If there is only one executor for the deceased’s estate, his
status would be that of an individual, but if there is more than one executor,
their status would be that of an Association of Persons(AOP). In both cases,
however, the returns filed would be assessed as in the case of an individual.
Thus, income from the estate would be taxed at the normal rates of tax
applicable to individuals. The executor would be eligible for rebates and
deductions on any investments from the income of the estate, but he would not
get the extra rebate available to a senior citizen or woman assessee below the
age of 65 if the deceased was a senior citizen or a woman. In the case of
losses, since the executor is assessed income of the estate of the deceased. He
can carry forward any losses incurred by the deceased prior to death, and this
can be adjusted against the income arising from the estate while he is in
control of it. Any outstanding tax liability payable by the deceased can be
enforced against the deceased’s estate, and the executor is bound to make good
the payment. However, the executor will not be liable or subject to any
prosecution proceedings launched against the deceased before his death. Further,
an executor administers the estate as a representative of the deceased, and not
on behalf of the beneficiaries. Therefore, even if the deceased made separate
wills appointing different executors for different properties, a single return
would have to be filed for the entire estate, and the tax department would
conduct a single assessment
Tax
Liability of Dead Person – Who’s responsible?
Legal
Heir is not responsible to pay income tax of the deceased from his own money. If
there are tax liabilities of the dead person,legal representative is liable to
pay income tax on behalf of the deceased. Advance tax payments and self
assessment tax payments are also to be done by the legal representative. The tax
is to be recovered from the estate of the deceased. Legal representatives would
be personally liable to the extent of the assets to which they come into
possession. Thus, all the legal heirs are liable upto the extent of the assets
that they inherit.
Example:
Shyam and Shankar are brothers. Shyam receives Rs. 50,000 and Shankar Rs.
1,50,000 after the death of their father. Tax liability of the father is Rs.
75,000, so Shyam can not be liable to pay more than Rs. 50,000 (the upper
limit), as that is what he inherited from his father
How
to Register as a Legal Heir at incomeTax efiling
Website
From
IncomeTax Website https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html
User
should register as a Legal Heir to do e-Filing on behalf of the deceased.
Deceased person’s PAN and Legal Heir’s PAN should be registered in the e-Filing
portal. If Deceased person PAN is not registered in the portal then the Legal
Heir can register on behalf of the deceased person.Following are the steps for
registration of Legal Heir:
·
Step
1
− LOGIN to e-Filing application and go to ‘My Account’ –> Register as Legal
Heir.
·
Step
2
− Provide the necessary details and attach a zip file containing the below
documents. Note: The zip file attachment should not exceed 1Mb.
o
1.
Copy of the Death Certificate
o
2.
Copy of PAN card of the deceased
o
3.
Self-attested PAN card copy and
o
4.
Legal Heir certificate** or Affidavit in presence of a Notary Public. **
Following documents will be accepted as Legal Heir
certificate.
§
1.
The legal heir certificate issued by court of law
§
2.
The legal heir certificate issued by the Local revenue authorities.
§
3.
The certificate of surviving family members issued by the local revenue
authorities
§
4.
The registered will
§
5.
The Family pension certificate issued by the State/Central
government.
·
Step
3
Click Submit.
·
Step
4
The request will be sent to the e-Filing Administrator.
·
Step
5
The e-Filing Administrator will review/verify the request and approve/ not
approve as applicable. e-Filing Administrator may approve as Temporary Legal
Heir or Permanent Legal Heir, based on the documents uploaded. An e-mail is sent
to the registered e-mail ID.
On
e-Filing administrator’s approval, the ITR Form of the deceased person can be
uploaded via LegalHeir login.The
Legal Heir should add his/her PAN in the verification part of the ITR Form,
validate and generate the xml of the return and upload the return of the
deceased using the Legal Heir login.
A
person is treated as a Temporary Legal Heir when the person fails to
submit any one of the five Legal Heir certificates mentioned in Step
2.
The Temporary Legal Heir is allowed only to upload ITR/Forms and will not be
able to access all other services, which includes add CA to submit audit forms
(other than ITR) on behalf of the deceased.
A
person is treated as a Permanent Legal Heir whwhen the person
submits any one of the five Legal Heir certificates mentioned in Step 2. The
Permanent Legal Heir may file Income Tax Returns/Forms,
·
View
Status of Income Tax Return/Forms, ITR-V Acknowledgment and other filing status
of e-Filed
·
Returns/Forms
in respect of the deceased.
·
One
can also view the status of the request under My Request List menu, post
Login.
What
to do in case of Refund of deceased person
Where
there is any refund in case of a deceased assessee, the refund can be received
by the legal heir just like he/she can sign the Return of Income. Refund cheque
can be encased in any bank account where the deceased holder was a joint
account holder with any other person. If there is no such joint account, the
nominee appointed by the deceased assessee can operate the account. Where there
is no nominee, the heirs of the deceased person are required to submit various
documents as evidence such as Death Certificate, Succession Certificate from
court, etc. as per the procedure of different banks. From FY 2014-14(AY 2014-15)
i.e returns filed by 31 Jul 2014 Refund will be credited directly into the
account , no cheque will be issued.
Related
Articles:
It
is said that the only sure things are death and taxes, but even death doesn’t
save a person from having to pay taxes or filing his income tax return. Legal
representative have to file the Income tax return of deceased. Have you had to
file the Income tax return of your loved one? How difficult was the process?
What problems you faced? Was it difficult to get the Legal Heir
certificate?
**********************************************
OUR OLD POSTS ON INCOME TAX AND TAXATION
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