Income Tax Department Notice: If you or anyone in your family pays income tax, then this news is specifically for you. Today, we are going to explain an Income Tax rule that everyone should be aware of.
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Income Tax Rules After Death: Everyone invariably has questions regarding income tax. Today, we are going to address one such tax-related query—one that has likely crossed your mind at some point: What happens to a person’s outstanding tax liabilities if they pass away before filing their Income Tax Return (ITR)? Does the Income Tax Department waive the tax, or does this responsibility fall upon someone else? If you, too, are seeking the answer to this question, let us provide you with the correct explanation.
Who Files the Income Tax Return?
According to Section 159 of the Income Tax Act, if a taxpayer passes away before filing their taxes, their legal heir becomes responsible for paying the tax on that individual’s income. Simply put, the person who inherits the deceased’s assets is the one required to pay the tax.
Does an Heir Have to Pay Taxes Out of Their Own Pocket?
Many people likely wonder: what happens if the tax liability exceeds the inherited assets? In such cases, the Income Tax Department offers some relief. The Income Tax Act stipulates that a legal heir is liable only up to the value of the assets they have inherited from the deceased. Simply put, if an individual inherits assets worth ₹5 lakh, but the deceased’s tax liability amounts to ₹7 lakh, the heir is required to pay taxes only up to the limit of ₹5 lakh. They cannot be compelled to pay the remaining ₹2 lakh out of their own personal assets.
What Steps Must Be Taken After the Death of a Taxpayer?
First, you must visit the official e-filing portal of the Income Tax Department. There, you are required to register yourself as the representative of the deceased. Without completing this registration, you will be unable to file any tax returns on their behalf.
To register, you will need to upload certain important documents:
The deceased’s death certificate
The deceased’s PAN card
The legal heir’s PAN card
Proof of being the legal heir
What happens if taxes are not paid?
If, following the taxpayer’s death, the legal heirs forget to file income tax returns—or intentionally choose not to do so—the Income Tax Department may issue a notice in the name of the deceased. If the tax is not paid on time, the Department will levy penalties and interest, just as it would for a living taxpayer. The only difference here is that the penalty must be paid by the legal heir.
Important Points
Refrain from completely closing the deceased’s bank accounts until the entire tax process has been finalized, as any tax refunds may be credited to those very accounts.
Safeguard the will, the succession certificate, and all other documentation related to the death.
Tax regulations can be complex during such times; therefore, seek the advice of a tax expert in these matters.
