You Have To File Tax Returns Of A Dead Person In India

First the caveat: You have to file tax returns of a dead person, only if there is a tax liability that has arisen during the financial year. Not otherwise.

July 31st is the last day for filing tax returns. Let's say that Mr. A, a retired person has had a lot of interest income to the tune of Rs 4 lakhs and rental income of Rs 3 lakhs during 2015-16.

He died in April without filing his tax returns. Now, since there is a tax liability it is the duty of the legal heir to file the tax returns of such a person, given the fact that his income of Rs 7 lakhs during 2016-17 is certainly liable for tax.

The liability that arises on account of taxes is up to the extent of the assets held by the deceased. For example, if the tax liability of the deceased is Rs 2 lakhs and the assets are less than that, the legal heir has to pay to the extent of the assets inherited.

It is important to state that the liability would arise only till death. Any income generated after the death would arise to the legal heir. For example, if there is rental or interest income it would be deemed to be the income of the legal heir in India.

What happens if you do not file tax returns of the deceased?

If you do not file tax returns and there is a tax liability, the tax authorities could send a notice. The amounts as we stated cannot be recovered from the legal heir, but, only from the assets of the deceased, which is the responsibility of the legal heir.

Now, there are a number of issues here. If an individual dies with one legal heir, there is no problem whatsoever.

However, if a father dies with four sons and daughters than all of them become legal heirs.

The tax recovery and liability becomes more complicated as there are now 4 individuals involved.

If there is a dispute among the siblings on distribution of assets the matter gets all the more complicated. The second issue is that the legal heirs must have immediate access to the assets.

Let's say that the father has a tax liability of Rs 2 lakhs and the only assets is shares worth more than Rs 5 lakhs. If the father has not made a nominee for the shares, it is a highly complicated process to get it transferred if the shares are in excess of Rs 5 lakhs.

In case there is a pending tax litigation the matter gets even more entangled.

How do you file tax returns of the dead?

You need to register on the income tax portal and use the details of the deceased person. All the details would be in the same manner as we do it for our ownself.You would have to upload certain important documents liek the permanent account number and the death certificate of the deceased.

Remember, the last date to file tax returns would be July 31, 2016.

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