ITR filing of deceased person: Documents required, steps to be taken by legal heirs

Even after death, a person cannot be absolved of his tax liability. The legal heirs of such deceased person are required to pay the tax dues and may be subjected to interest and/or penalty in case of non-payment of the tax due and/or not filing the ITR of the deceased. That is, if the legal heir does not file ITR of the deceased, then the former will face penal consequences. Thus, it’s important that the legal heirs should be aware of their responsibility of filing the income tax return (ITR) pertaining to the settlement of such dues of the deceased taxpayer.

According to the Income Tax Act, 1961, every individual whose total income exceeds the basic exemption limit is liable to file the relevant ITR. (Basic exemption limits for various age groups are: Rs 5 lakh for Resident Super Senior Citizen (80 years or more); Rs 3 lakh for Resident Senior Citizens (60 years or more), and Rs 2.5 lakh for other individuals under the old tax regime. The basic exemption limit is Rs 2.5 lakh irrespective of age, under the new tax regime. The provisions also state that even if an assessee’s total income does not exceed the basic exemption limit, he/she still needs to file the ITR for that particular year if he/she has:

• Deposited an aggregate amount exceeding Rs 1 crore in one or more current account maintained with a bank or co-operative Bank in the financial year; or
• Spent more than Rs 2 lakh on foreign travel for himself or any other person in the financial year; or
• Incurred more than Rs 1 lakh towards consumption of electricity in the financial year.

Who is responsible for filing ITR of the deceased?
Ideally, legal heir who would be required to file the ITR would be determined in accordance with the Will, if any, made by the deceased. In the absence of any Will, spouse or any of the children (i.e., surviving family members) may be considered as the legal representative and as such, any one of them can opt to file the return.

As per the law, in the case of a deceased person who has expired during the year, the responsibility for filing the return till the date of death shall be that of the legal heir. However, for remaining period of the financial year (i.e., post-death), the responsibility for filing return shall be on the executor of the estate of deceased till the time assets under the estate are distributed to the legal heir/s. For instance, if Mr A dies on November 03, 2020 and is survived by his son say Mr B, the income tax return with respect to Financial Year 2020-21 (Assessment Year 2021-22) would be filed as follows:

• The ITR for income from the beginning of the financial year i.e. 1st April 2020 to November 03, 2020 would be filed by Mr. B as legal heir of Mr. A.
•  The ITR for any income accruing or arising on or after November 03, 2020 would be filed separately by the executor of the estate. The liability of the executor to file the return is only until the legal transfers are carried out. Once the assets are distributed, the legal heir would be liable to file the tax return

The legal heir will have to file returns and pay taxes in respect of the estate of the deceased, which are in or may come into his possession, i.e., he/she may inherit from the deceased person. Also, the legal heir will inherit all the liabilities of the deceased and will be held liable in the future for any proceeding initiated against the deceased before his death. Do keep in mind that the legal heir will be liable only to the extent of the assets inherited from the deceased.

Income of deceased person
It is important to note that all the income which is accrued or received from beginning of the financial year till the date of demise will be considered as the income of the deceased person. Further, tax on any income accrued or received from the assets that are inherited from the deceased will be borne by the legal heir himself. This would mean that after receiving the inheritance, any income accrued or received from the asset will be considered as the legal heir’s own income.

What if legal heir does not file ITR?
If a legal heir does not file the ITR of a deceased person before the expiry of deadline (December 31, 2021 for FY 2020-21), then he may have to face severe consequences for non-compliance. It may include penalty under section 270A which is equivalent to 50% of the tax which may have been avoided by the taxpayer by not furnishing the ITR, prosecution under section 276CC, etc.

Documents required to file deceased’s ITR
In order to register as a legal heir following documents are to be uploaded on the income tax e-filing portal:

• Copy of PAN of the Deceased
• Copy of PAN of the Legal Heir
• Copy of the Death Certificate
• Copy of any one of the legal heir proof from the below list:

*Legal Heir Certificate issued by Court of Law /Local Revenue Authority.
*Surviving family member certificate issued by the Local Revenue Authority.
*Family Pension certificate issued by Central/State Government.
*Registered will.
*Letter issued by the banking or Financial Institution in their letterhead, with official seal and signature mentioning the particulars of nominee or joint account holder to the account of the deceased at the time of demise.

• Copy of the order passed in the name of the deceased (Mandatory only if the reason for registration is ‘Filing of an appeal against an order passed by tax department in the name of deceased’)
• Copy of the order/notice (Mandatory only if the reason for registration is ‘Filing of return of income/form for period in which deceased was alive through condonation request’ (or) ‘A notice/order received from Income Tax Department in the name of the applicant for compliance on behalf of a deceased’)
• Copy of Indemnity Letter. This letter guarantees that payment of all tax claims made with the tax department would be indemnified by the legal heir/s filing the return. In layman terms, the legal heir/s are providing guarantee for the payment of the tax dues of the deceased to the tax department by way of such indemnity letter

Process of filing ITR by the legal heir
In order to file the ITR of the deceased in the capacity of a legal heir, the first step is to register oneself as a legal representative of the deceased person on the income tax E-filling Portal.
Following are the steps to register as a legal heir on the new e-filing portal 2.0:
1. Log on to ‘e-Filing’ Portal https://www.incometax.gov.in

2. Go to ‘Authorised Partners’> Click ‘Register as Representative’

3. Click on the ‘Lets Get Started’ to create a ‘New Request’

4. Click on ‘Create New Request’

5. A dialogue box would appear stating ‘Category of Assessee who you want to represent’. Select the option ‘Deceased (Legal Heir)’ from the drop-down.

6. Fill in the details required

7. Attach the necessary documents (Maximum file size allowed is 5MB)

8. Click on ‘Proceed’ and ‘Verify the Request’

9. Click ‘Submit Request’. A Success Message will be displayed confirming the submission of request to ‘Register as Legal Heir’. The ‘Reason for Registration’ of the legal heir as a representative assessee should be mandatorily provided. The legal heir may choose amongst one of the following reasons:

1. Filing of an appeal against an order passed in the name of deceased
2. Submit service request such as refund re-issue/rectification etc. of proceedings concluded in the name of deceased
3. Filing of return of income/form of period in which deceased was alive through condonation request
4. A notice/order received from Income Tax Department in the name of the applicant for compliance on behalf of a deceased
5. Others
Once one has registered as a legal heir, a request will be sent to the e-Filing Admin for approval. The e-Filing Admin will check the authenticity of the request details and may Approve/Reject the request. Upon Approval/Rejection, an e-mail and SMS will be sent to the legal heir who raised the request.

In case of the request being rejected, the intimation for rejection would be accompanied by a valid reason for such rejection. For instance, upload of incorrect information or documents, etc. Accordingly, the taxpayer should take the necessary action to rectify such rejection. The estimated time for such intimation of approval/ rejection depends upon the time taken by the jurisdictional Assessing officer for verification and may usually go up to 15 days. However, considering the technical issues in the new IT portal at present, the time taken may go well beyond 15 days.

After registering as a legal heir, ITR can be filled in the normal format and in the standard procedure as followed by a natural living individual while filling his own return. Thus, the return would be verified by the legal heir who can simply sign the ITR Acknowledgement and a copy of the same can be sent to Central Processing Centre (Bengaluru).

Alternatively, the legal heir may also e-verify the return by way of generating OTP using his own details such as registered mobile number. In the beginning of the ITR, wherein Aadhaar details are required to be provided, the Aadhaar of the deceased can be provide. Further, there is a specific provision in the ITR which asks for “Aadhaar Number of the representative”, wherein the details of the Legal representative’s Aadhaar can be provided in the ITR.