Duty of Legal Heir for I-T Return Filing of a Deceased Person

Furnishing income tax returns is important. Income tax is mandatory for people who have passed away. According to the Income Tax Department of India, the tax must be furnished for the year in which the individual has died. Various people do not have any idea about this rule.

It is now mandatory to file returns for our loved ones who are not with us today. Below are the steps by which we seek to file the returns for departed ones.

You Have To Furnish The Two Returns And Not To Furnish Only One

To start this, you shall have to proceed with the furnishing of two income tax returns. For instance, if an individual dies on October 7, 2023. The first is the return for the income earned from FY April 1, 2023, to the date of death on October 7, 2023. The second is the income tax return that needs to be furnished on the income earned by the departed one from the death date, October 7, 2023, till the end of FY (March 31, 2023).

Despite the deceased having made a will, the heir under the law must furnish the 1st return, and then the second return is to be furnished by the executor. The second return is filed by the executor as he executes the will of the lost one and is liable to pay the tax, if due, of the deceased, i.e. loans and others. “A PAN for the estate of the deceased too needs to be obtained,” said Ameet Patel, partner at Manohar Chowdhry & Associates.

Also, for his own income, the legal heir is then entitled to file the same. This is separate from the tax filed for the lost one.

However, it is not that you visit the ITR portal and furnish the returns. The current period overlooks the PAN and Aadhaar number associated with several investments. Authorities can easily know if the person who is entitled to the filed return is actually dead or not. One needs an Aadhaar to have a certificate of death. Founder and CEO of Chartered Club Karan Batra talk about the person who is eager to furnish his return on behalf of his lost father.

“He got a notice that since the person is dead, how could the income tax return be filed? The Aadhaar number is mentioned while procuring the death certificate, while the income tax details are linked with Aadhaar.”

Patel says the reason that the individual who does not exist in the world cannot furnish his income tax returns: “He filed the return in his father’s name, which is not the correct way to file the return.”

This is the reason that the heir under the law, along with the executor required to furnish the return.

Under The Law, The Heir Should Be Enrolled on an Online Portal Of Income Tax

Before furnishing the tax returns by the legal heirs for their departed ones, the heir herself needs to enrol on the income tax website first. The experienced one suggests that the process is a bit longer. Karan Sood takes a longer time and feels distressed while understanding the process to furnish the returns as an heir for his late father who lost his life in February 2017.

In the email account of Karan’s father, an email is sent by the income tax department about the tracing of a fixed deposit. Karan then decides to check out the scenario with chartered accountants along with some income tax officials.

“My mother was registered as a legal heir through an online procedure executed on the income tax e-filing portal. It was rejected once and, upon re-filing, was accepted after a few weeks.” Sood said.

However, the date of furnishing of tax returns for his deceased father gets outdated unless he understands the process along with other paperwork. In the financial year 2023-24 estimation year FY 2024-25, he can furnish the returns by July 31, 2024.

There is no other option left but to simply estimate the tax due and the late interest along with a penalty. He had saved the receipt for that. He advised that an offline process for furnishing the tax returns for the lost one can be provided via an extended window in terms of delays in the process, along with the ignorance that gives no time to the family for filing the taxes, such as in times of trouble.

But with compliance, he should have to pay tax as a return along with the penalty and interest. No other procedure seems to be available to avail for the refund for the tax deducted at source on FDs, via which the income tax department traces the non-furnishing of returns. This is because you cannot avail the refund on the ITR if you had not filed the ITR. Indeed, you cannot file the returns after the last date mentioned by the department.

To reduce the stress for the son/daughter of the deceased, the court has held that if the lost one has a joint account with the legal successor.

“Then a letter from the bank stating that the person has been a joint account holder with the deceased serves as a nomination for a legal heir,” Patel said.

Missing Return Filing

In Form 26AS, Sood’s father’s income has been displayed as a tax deduction for FDs. You cannot go with the complex procedure if there is no income on which the tax is to be deducted or no refund which is to be availed.

“If there is no income in the name of the deceased, then there is no need to file the return. Even the return as an executor to the estate is not needed if all the assets have been transferred to the legal heir.

However, sometimes shares aren’t transferred, bank accounts are not closed, and the estate is not transferred. That is when the second return needs to be filed for the estate of the deceased person,” said Patel.

Also, the same applies to that the left due on taxes should be paid by the legal heir of the deceased person. Also, if any refunds are due in the name of the deceased person, then you are not supposed to close down the bank accounts of the same person.

Especially if that person whose name is mentioned as the primary person in the books of income tax. Indeed, if there is a common account with the legal heir, then it should not be closed rapidly because of simple documentation and procedural concerns.