When a taxpayer dies, their income tax obligations do not end immediately. Any income they earned up to the date of their death during the relevant financial year remains taxable. If they have not filed their income tax return or have any pending tax dues, those obligations much be fulfilled.
This raises an important question for families and legal heirs of the deceased person: who is responsible for handling these tax formalities and whether they have to pay the outstanding tax dues from their own pocket.
Is it necessary to file ITR on behalf of a deceased taxpayer?
Yes, if the deceased person’s total for the relevant financial year exceeds ₹2.5 lakh or as per provision of Section 139(1), it is mandatory for their legal heir or representative to file income tax return on their behalf.
If it’s not done within the due date, the legal representative can also file a belated return by 31st December of the relevant assessment year. It’s advisable to not ignore it because ITR must be filed if the deceased taxpayer’s income exceeded the prescribed threshold. The legal representative may received a notice from the income tax department and face scrutiny if they don’t comply with the rules.
Who should clear tax dues of a deceased taxpayer?
After a taxpayer’s death, the responsibility for handling their financial responsibilities shifts to their legal heir or legal representative. This includes filing the deceased person’s , responding to tax notices, and settling any outstanding tax dues on their behalf.
Under Section 302 of the Income-tax Act, 2025, the legal representative is required to fulfil the tax obligations that the deceased taxpayer would have been responsible for if they had been alive.
“Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased,” the income tax law states.
The provision further clarifies that:
- Any tax proceeding initiated against the deceased before their death will be deemed to have been initiated against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased.
- Any proceeding that could have been taken against the deceased if they had survived, may be taken against the legal representative
- All provisions of this income-tax Act will apply to the legal representative accordingly.
- The legal representative of the deceased shall be deemed to be an assessee for the purposes of this Act.
Do legal heirs have to clear a deceased person’s tax dues from their own pocket?
The limits a legal heir or representative’s liability of clearing tax dues to the value of the assets inherited from the deceased taxpayer. This means legal heirs are not required to pay the said taxpayer’s tax dues from their personal funds if the estate is insufficient to cover the liability.
“…the liability of a legal representative shall be limited to the extent to which the estate of the deceased is capable of meeting the liability,” according to the law mentioned in the income tax portal.
This rule ensures that tax recovery is made from the estate left behind by the deceased taxpayer and not from the personal income of the legal heir or legal representative.
For example, let’s assume the deceased person has left behind assets worth ₹2 lakh but they owe ₹3 lakh in tax. In such a case, the amount will be recovered from those assets and legal heirs will not be required to pay the remaining ₹1 lakh from their own funds.
The legal heir only becomes personally liable for paying taxes if they transfer, sell or distribute assets from the deceased’s estate before clearing outstanding tax dues. However, such liability is limited to the value of the assets that were transferred or disposed of.