Tax Liability of Legal Executor or Administrator

INCOME TAX ACT 1961
SEC 168 – EXECUTORS

QUOTE:

(1) Subject as hereinafter provided, the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor, —

(a) if there is only one executor, then, as if the executor were an individual; or

(b) if there are more executors than one, then, as if the executors were an association of persons; and for the purposes of this Act, the executor shall be deemed to be resident or non-resident according as the deceased person was a resident or non-resident during the previous year in which his death took place.

(2) The assessment of an executor under this section shall be made separately from any assessment that may be made on him in respect of his own income.

(3) Separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests.

(4) In computing the total income of any previous year under this section, any income of the estate of that previous year distributed to, or applied to the benefit of, any specific legatee of the estate during that previous year shall be excluded; but the income so excluded shall be included in the total income of the previous year of such specific legatee.

Explanation- In this section, “executor” includes an administrator or other person administering the estate of a deceased person.

WHAT DOES THIS MEAN?

This applies to a situation wherein the deceased had specifically appointed a person(s) as the executor / administrator through a WILL prior to the death of the deceased.

This essentially means that if there was no WILL, then section 159 of Legal Representatives will apply.

Key points:

a) Executor/ administrator of the deceased will be responsible to file the Return of Income of the deceased as well as pay the taxes of the deceased

b) Executor/ administrator of the deceased shall have the same residential status as in case of the deceased in the year of death

c) Executor/ administrator of the deceased will be assessed to tax in their dual capacity, firstly as executor/ administrator of the deceased and secondly in their personal capacity. For sake of ample clarity there would be a Chinese wall and no aggregation of income and tax liability will be done.

d) If any amount is paid by the Executor/ administrator of the deceased on behalf of the deceased, then executor/ administrator of the deceased shall be entitled to recover the same from the estate of the deceased person.

e) In any case the executor/ administrator of the deceased will be responsible only till the date of complete distribution of all assets of the deceased. Post this the legal heirs/ beneficiaries of the deceased shall be responsible.

f) If some part of the income or the estate of the deceased was distributed to the legal heirs or beneficiaries or kin of family, then part of such income shall be excluded for taxability calculation from the hands of the executor/ administrator of the deceased but shall be included in the income of the respective recipient.