INCOME TAX ACT 1961
SEC 159 – LEGAL REPRESENTATIVES OF THE INCOME TAX ACT 1961
(1) Where a person dies, his legal representatives shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.
(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for levying any sum in the hands of the legal representative in accordance with the provisions of subsection (1),
(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
(c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
(5) The provisions of sub- section (2) of section 161, section 162 and section 167 shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
(6) The liability of a legal representative under this section shall, subject to the provisions of subsection (4) and sub- section (5), be limited to the extent to which the estate can meet the liability.
WHAT DOES THIS MEAN?
If the deceased was an Income Tax payer, it is imperative that the beneficiaries, close to kin of the family, legal heirs etc of the deceased must file the last return of income of the deceased for the period till the deceased was alive.
This means that the income of the deceased till the date of being alive must be disclosed and Return of Income needs to be filed by the legal representative – under the obligation of filing the return on behalf of the deceased.
For this the legal representative needs to register oneself through the income tax website for filing the return on behalf of deceased.
Mr. A filed his return of Income for the period ended March 2017 in June 2017.
On July 9, 2017, Mr. A suffered a massive cardiac arrest and passed away. This means that the legal representative must file Return of Income of the deceased – Mr. A for all income earned by Mr. A from April 1, 2017 till July 9, 2017. (i.e for 100 days).
WHO IS A LEGAL REPRESENTATIVE?
Legal Representative should have any of the below mentioned documents to qualify as a legal representative:
a) Registered Will mentioning the same, ensure it’s the last WILL.
b) The legal heir certificate issued by the court of law / local revenue authorities/ bodies
c) The certificate of the surviving family members issued by the local revenue authorities.
d) The family pension certificate issued by the State/Central government.
WHAT IS THE PROCESS OF REGISTERING AS A LEGAL REPRESENTATIVE?
Registration by a legal representative is the first step for e-filing of return on behalf of deceased individual.
PAN of both the deceased person and legal representative should be registered in the e-filing portal.
In case the PAN of the deceased person is not registered then the legal representative can register on behalf of the deceased.
Then, legal representative must follow steps for the registration:
Step A – Log on to – https://incometaxindiaefilling.gov.in income tax website
Step B– Log on to e-filing portal using legal heir credentials
Step C – Go to My Account and register as Legal Heir
Step D – (i) Select the type of Request – New Request
(ii) Enter the details of the deceased, select the files to upload, Annex zip file (max 1MB in size) containing PDF of the scanned documents, mentioned below :
a. Notorised copy of Death Certificate
b. Zerox copy of the PAN Card of the deceased
c. Zerox copy of self-Attested copy of PAN card of the Legal heir
d. Legal Heir Certificate (proof of qualifying to be a legal heir)
Click submit to get the Acknowledgement from the Dept. with a transaction ID.
Filing Income Tax Return as a Legal Representative
Once the request for registration as legal representative is approved as explained above, the legal representative can file return of the deceased.
Process for filing such a return:
a. Download the ITR Form applicable to the deceased, fill the ITR Form and generate the XML File.
b. Login to Income tax website – https://incometaxindiaefilling.gov.in
c. Login to e-filing portal using Legal heir credentials
d. Go to e-file and upload the return
e. Fill the following details and select the XML File
f. PAN – Select the PAN of the deceased.
g. ITR Form Name – Select the ITR Form to upload (i.e. ITR 1, 2, …)
h. Select Assessment Year
i. Upload the XML File
j. Legal heir can digitally sign the ITR of deceased using his Digital Signature Certificate
k. Click Submit
How to compute Income of the deceased?
The legal representative is responsible for filing the return of the deceased and hence must exhibit due caution and go into details as any misstatement or misinformation could not stand pardon. Further the return should disclose the income of the deceased till the date of death, thereby the tax payable on it would be calculated as if the deceased was alive. The calculation should be based on proofs of income/ revenue and expenses etc.
Please note, that any subsequent income earned post date of death from the assets inherited from the deceased would be taxable in the hands of the recipient in case of WILL or in the hands of the beneficiary of that asset as per order of appropriate authority in case of succession or administration.(in the absence of a WILL)
Tax liability of Legal representative
Tax Liability of the legal representative would stand restricted to the extent of paying taxes liable on the Income tax return of the deceased and limited to the extent to which the assets that are inherited and capable of meeting the liability by the legal representative.
Further the legal representative is responsible for the tax payable and for the other sum i.e. Penalty, fine or interest which the deceased would have been liable to pay had the deceased not died.
This means that the Penalty proceedings for a default by the deceased can also be initiated against the legal representative. Needless to mention that the liability of the legal representative would stand restricted to the extent of the assets inherited from the deceased.
For sake of ample clarity a legal representative may be penalised for the default committed by the deceased prior to the death of the deceased. However, legal representative cannot be prosecuted for the offences committed by the deceased.