Are Legal Heirs Responsible For Paying The Deceased’s Tax Dues?

Losing a loved one is hard, and handling their belongings and taxes can add to the stress. Knowing what to do will make things a lot easier. Whether the deceased person left a will or not will also affect the process significantly. Let’s understand what exactly to do during this tough time. 

Understanding What Inheritance Is

Inheritance is the asset or property a person leaves to others after their death. The deceased's obligations and debts are also put in the inheritance. 

Section 159 of the Income Tax Act, of 1961, says that when someone dies, the people who manage their estate have to take care of any income tax the deceased owed. These representatives must file tax returns and pay any taxes from the deceased's money before giving out the remaining assets to the heirs. This ensures that the tax responsibilities of the deceased person are properly handled by their legal representatives.

Is The Legal Heir Responsible To Pay The Dues?

It is usually considered that the legal heir will have to pay all dues of the deceased, but that is a misconception. The legal heir is not responsible for paying for the income tax dues of the deceased from their pocket. The legal heir is only liable up to a certain extent for the assets of the deceased. 

Legal heirs do not have to pay for the deceased’s debts from their own money, those debts will be first settled from the assets of the deceased’s estates, and then the remaining will be distributed to the heirs.

The Reserve Bank of India (RBI) gave an official announcement regarding the Banking Companies (Nomination) Rules of 1985, explaining how to handle claims and close savings accounts, fixed deposit accounts, and safe deposit lockers of a deceased person. 

As per the BCC (Banks Commitment to Customers) Code, bankers are bound not to reveal information related to the client's accounts. They are only bound to reveal the information in the following cases.

• If bankers have to provide information by law.

• If clients ask to reveal all information.

• If there’s a duty towards the public to reveal information to prevent fraud.

• If the banks have the client's permission in writing.

Tax Filing Requirements Of A Deceased Person

The deceased person’s ITR filing must be done from April 1 to the date of death. The legal representatives of the deceased person are responsible for the tax filing of the deceased’s final tax. All deductions and taxes that have to be paid will be deducted from the deceased person’s estate.

After this, it is important to obtain an Income Tax Clearance Certificate (ITCC) or No Objection Certificate (NOC) from the authorities. The certificates attest that all tax liabilities of the deceased person have been settled. These certificates are needed before the distribution of the assets to the legal heirs as well.

The legal heirs can seek legal advice from tax advisors to ensure compliance with tax laws and optimise the tax outcomes.

How To Register As A Legal Heir?

Follow these steps to register as a legal heir.

1. Visit https://eportal.incometax.gov.in/iec/foservices/.

2. Login using user ID and password.

3. Go to ‘Authorised Partners’ and select  ‘Register as representative assessee’.

4. Click on ‘Let’s get started’.

5. Create a new request.

6. Select the ‘Category of assessee’ you want to represent.

7. Enter the required details of the deceased person.

8. Verify using OTP.

9. The request to be a legal heir will be submitted.

10. To view the status, click on ‘View Request’.

Conclusion

The responsibility to manage a deceased person’s tax dues is not on the legal heir and is the responsibility of the legal representatives of the deceased person. The legal heir does not have to pay any dues from their money, it will be deducted from the deceased person’s funds.