|Death doesn’t absolve the person from tax liability|
TAX TALK-09.11.2015-THE HITAVADA
CA. NARESH JAKHOTIA
Death doesn’t absolve the person from tax liability
My brother-in-law was working in public sector undertaking as class-I officer. He was retired in June 2015. Due to prolonged illness (since 20th June’2015), he died in mid of Sept’2015. As per company rule, gratuity, family pension, leave encashment etc have been provided to him after retirement. After death, his bank account has been transferred in the name of my sister. Please provide the following information:
"'In this world nothing can be said to be certain, except death and taxes." Benjamin Franklin, 1817.
One more line could be added to the above. Even death doesn’t absolve person from the tax liability. Income tax return would be required to be filed by the deceased through his legal representative. Obligation to file Income tax return and liability to pay taxes on income of deceased is same as that of alive person. The only distinction is that in case of alive person, he himself or through person authorized by him have to file the Income Tax Return whereas in case of deceased assessee liability to pay tax & file return is either on legal representative or executor. Filing of the return would be mandatory even if taxpayer dies before filing return for any year if his/her total income exceeds the basic exemption limit. Any refund due will be credited to the deceased person account after filing of the return within reasonable time. A deceased person is entitled to all the deductions, exemptions etc for the entire year but tax is levied only on the income earned till his death. After his death, subsequent income from his assets and the tax implication thereon would migrate in the hands of the legal heirs receiving those assets. All the tax payments like outstanding tax demand, advance tax, self assessment tax, etc are also to be made by the legal representative. Further, the legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he was alive as automatic charge is generated over the property left [Section 159 of the Income Tax Act-1961]. However, this recovery cannot be more than the amount inherited by the legal representative from the deceased.
Refund claim of the deceased person:
Its not necessary that the return can be filed only if there is a tax liability. It could be filed even if there is no tax liability or there is a refund due to the deceased. In such cases, the refund can be received by the legal heir. However, getting the refund in such case could be little bit complex. The amount would be credited to the bank account where the deceased holder was a joint account holder with any other person. If there is no such joint account, the nominee appointed by the deceased assessee can operate the account. Where there is no nominee, the heirs of the deceased person are required to submit various documents as evidence such as Death Certificate, Succession Certificate from court, etc. as per the procedure of different banks so as to transfer the account in the name of legal heir. In case of problem, legal heir could approach the assessing officer of deceased for the help & guidance.
Cancellation of the PAN card:
Many a time, PAN holder receives notices from the department to file return or to explain the reasons for non filing of the return for earlier years or compliance with any other information. There is no defined procedure to cancel the PAN Card. However, legal heir should surrender the PAN card by writing a request letter to the Assessing Officer of the deceased along with death certificate and PAN Card. It would be sufficient compliance on behalf the part of the taxpayer & may not only reduce the notices etc from the department but also would reduce the possibility of misuse of PAN card of the deceased.
Procedure for filing the income tax return of the deceased person:
Filing of tax returns by legal heir is a little bit cumbersome process. Filing of Income Tax Return can be done online by Legal Heir using Digital Signature Certificate (DSC). The legal heir has to get a DSC in his/her own name. This DSC needs to be registered in the ITD e-filing website. Legal heir is required to make a request by sending a mail to firstname.lastname@example.org mentioning the name, PAN, Date-of-Birth of deceased as well as that of the legal heir along with scanned copy of the death certificate of the deceased. On receipt of above email by the e-filing administrator, the Legal heir’s PAN will be linked to the deceased assessee and a confirmation email will be sent to email id of the legal heir. With this, legal heir would be enabled to file the return of deceased using legal heir’s DSC. By following the following further steps, the return could be filed by the legal heir:
[The author is a practicing Chartered Accountant from Nagpur.
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