You are obliged to pay taxes even after death

New Delhi: According to the American philosopher Benjamin Franklin, there are only two certainties in life: death and taxes. Just as a person’s birth guarantees their eventual death, earning income necessitates the payment of taxes. Furthermore, any outstanding tax liabilities, even stemming from fraudulent activities after death, must still be settled.

Even in death, one cannot evade tax liabilities. In case of the total taxable income of a deceased individual exceeds the basic exemption limit. So, filing an Income Tax Return (ITR) under Section 139 (1) of the Income Tax Act becomes obligatory.

Now the question is who will file the ITR of the deceased?

According to the law, if the deceased person has left a will, it becomes the duty of their legal heir to file the ITR on behalf of the deceased. In the absence of a will, the law recognizes the spouse or children as legal heirs responsible. The determination of the amount of tax payable will be based on the income earned from the start of the financial year until the date of death.

Tax and investment expert Balwant Jain explains that the responsibility of a legal heir for tax liabilities depends on whether the deceased has left behind any tax obligations. Jain clarifies that if a person passes away with tax liabilities, these debts must be settled by their heir. However, this obligation arises only if the heir inherits property from the deceased. If no inheritance is received, there is no tax liability. According to the law, the heir is responsible for paying taxes up to the value of the inherited assets.

What is the process of filing ITR of the deceased?

To file the tax return on behalf of a deceased individual, the legal representative must first register themselves as such on the Income Tax Department’s ‘E-Filing Portal’. The legal heir can register the deceased’s PAN if it is not already registered. The legal representative should log in using their user ID and password on the portal, navigate to ‘Authorised Partners’, and select ‘Register as Representative’. They should then proceed to ‘Create New Request’ and provide necessary documents such as the death certificate and PAN card of the deceased. Additionally, the representative must submit their own PAN and certificate of representation. After the tax officer verifies these documents, they will approve the request. Then, the portal will update, allowing the representative to proceed with filing the deceased individual’s Income Tax Return (ITR).

What could be the loss if tax is not paid in the name of the deceased?

Failing to file the tax return of the deceased can result in several consequences. If any tax has been deducted, you may not receive the refund. As a legal representative, you must pay penalties and late fees on any outstanding tax amount. The Income Tax Department may consider non-disclosure of income as tax evasion. Proving tax evasion can result in penalties and legal consequences.

In cases where tax liability exists in the deceased’s name, it is crucial for the legal representative to promptly inform the Income Tax Department. Notifying or paying taxes late may result in authorities interpreting it as tax evasion, which can lead to significant penalties.