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Death doesn’t absolve the person from tax liability


Chartered Accountant

Death doesn’t absolve the person from tax liability
Query 1]
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:
  1. Is it compulsory to file a IT return (AY 2015-16) against PAN of my brother-in-law, as return could not be filed due to his prolonged illness and death? 
  2. If it is required to file a return, who can file it on his behalf?
  3. Is it necessary to close and surrender his PAN to Income Tax Authority and what documents are required to surrender the PAN and close the account? We have the death certificate issued by appropriate authority.
  4. While transferring the name of my sister in place of my brother-in-law in bank account, bank has not taken reference of her PAN. Is it necessary to give Sister's PAN to bank for submission of return from AY 2016-17, if any?
I would be grateful to you if you provide valuable information to the above queries in the Hitavada. [Dilip Singh, Jabalpur-]
"'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 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:
  1. Legal heir has to log in at Income Tax Website at wherein user should register on behalf of the deceased as a Legal Heir as the first step to e-Filing. Deceased person’s PAN and Legal Heir’s PAN should be registered in the e-Filing portal. If Deceased person PAN is not registered in the portal then the Legal Heir can register on behalf of the deceased person. For this, legal heir has to click on the menu ‘My Account then Register as Legal Heir”.
  2. Provide the necessary details and attach a zip file containing the below documents. (Note: The zip file attachment should not exceed 1MB).
  1. Copy of the Death Certificate
  2. Copy of PAN card of the deceased
  3. Self-attested PAN card copy and
  4. Legal Heir certificate or Affidavit in presence of a Notary Public. 
    [Following documents will be accepted as Legal Heir certificate.
    i. The legal heir certificate issued by court of law
    ii. The legal heir certificate issued by the Local revenue authorities.
    iii. The certificate of surviving family members issued by the local revenue authorities
    iv. The registered will
    v. The Family pension certificate issued by the State/Central government.
  1. After completing above part, legal heir has to click on “Submit” sign. On submitting, the request would be forwarded to the e-Filing Administrator. The e-Filing Administrator will review/verify the request and if found everything in order, will approve it. E-filing administrator may approve as Temporary Legal Heir or Permanent Legal Heir, based on the documents uploaded. An e-mail is sent to the registered e-mail ID.
  2. On e-Filing administrator’s approval, the ITR Form of the deceased person can be uploaded through Legal Heir login. The Legal Heir should add his/her PAN in the verification part of the ITR Form, validate and generate the xml of the return and upload the return of the deceased using the Legal Heir login. A person is treated as a Temporary Legal Heir when the person fails to submit any one of the five Legal Heir certificates mentioned in (2) above. The Temporary Legal Heir is allowed only to upload ITR/Forms and will not be able to access all other services, which includes add CA to submit audit forms (other than ITR) on behalf of the deceased. A person is treated as a Permanent Legal Heir when the person submits any one of the five Legal Heir certificates mentioned in (2) above. The Permanent Legal Heir may file Income Tax Returns/Forms, View Status of Income Tax Return/Forms, ITR-V Acknowledgment and other filing status of e-Filed
[The author is a practicing Chartered Accountant from Nagpur.
Readers may send their direct tax related queries at
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