A family is settling the affairs of a loved one who passed away mid-year. Bank accounts are being consolidated, property is being transferred, and somewhere in that list — often discovered only after an Income Tax notice arrives — is the obligation to file the deceased's Income Tax Return.

Death doesn't extinguish a tax liability. It transfers it.

Under the Income Tax Act, any income earned up to the date of death remains taxable, and the responsibility for filing the ITR and settling outstanding dues moves to the legal representative of the deceased. This isn't optional. It's a statutory requirement — and failing to comply can lead to notices, penalties, and complications at the time of property transfer.

The Legal Basis: Section 302 of the IT Act, 2025

Section 302 of the Income Tax Act, 2025 provides that the legal representative of a deceased person shall be liable to pay any sum which the deceased would have been liable to pay if they had not died, in the like manner and to the same extent as the deceased.

This is the direct successor to Section 159 of the old Income Tax Act, 1961 — the operative provision is identical; only the numbering has changed under the new Act.

The legal representative is deemed to be an assessee for the purposes of the Act. Their liability, however, is limited to the extent of the estate of the deceased — meaning a legal heir cannot be made personally liable beyond what they actually inherit.

One important protection: the liability of a legal heir cannot exceed the value of assets inherited from the deceased.

Who Is a "Legal Heir" for ITR Purposes?

A legal representative may be a spouse, adult child, parent, or any other legal representative of the deceased. Where there are multiple heirs, typically the one who registers first on the e-filing portal and takes charge of the financial affairs handles the compliance. If a Will exists and names an executor, Section 312 of the IT Act, 2025 governs the taxation of the estate in the executor's hands separately.

How Income Is Split: A Rule That Many Miss

This is the part most families get wrong. The deceased's income and the heir's income are not pooled together and filed in one return. They are split at the date of death.

Income up to the date of death is computed in the name of the deceased person and is reported in their ITR. Income arising after the date of death is computed in the name of the legal heir and is included in the heir's own return.

A practical example makes this clearer:

This split applies to every income stream — rent, interest, capital gains, pension, business income. The heir must obtain the relevant Form 26AS for the deceased's PAN to reconcile TDS correctly.

Step 1: Register as Legal Heir on the Income Tax Portal

Before any return can be filed for the deceased, the legal heir must register on the e-filing portal. Both the PAN of the deceased and the PAN of the legal heir must be registered on the portal. If the deceased's PAN is not yet registered, the legal heir can complete that registration on their behalf.

Documents required for registration:

• Death certificate of the deceased
• PAN card of the deceased
• Legal heir certificate (from a court or local municipal authority) OR a notarised affidavit on stamp paper

💡 Getting a legal heir certificate from a civil court can take weeks. A notarised affidavit is accepted for ITR filing purposes in the interim — though the formal certificate will be needed for property-related matters.

Portal Steps (as per the Income Tax Department's official manual):

Step 1: Log in to the e-filing portal with your own credentials (legal heir's PAN and password). Step 2: Go to Authorised Partners and click on Register as Representative Assessee. Step 3: Click "Let's Get Started" and then "Create New Request." Step 4: Select the category as Deceased (Legal Heir), enter the deceased's PAN, date of birth, and date of death, and upload the required documents. Step 5: Verify the request using the OTP sent to the legal heir's registered mobile and email. Step 6: The request is processed by the Income Tax Department within 7 working days. Approval or rejection is communicated via SMS and email.

Once approved, the legal heir can log in using their own credentials and, from the profile section, switch to the representative assessee view (as legal heir) to file returns on behalf of the deceased.

Step 2: File the ITR Under the Deceased's PAN

With the registration approved, the ITR is filed as usual — but using the deceased's PAN, for the income earned up to the date of death.

Key points:

• Select the correct Assessment Year — for example, AY 2025-26 for income earned in FY 2024-25 up to the date of death.
• Choose the correct ITR form based on the nature of the deceased's income (ITR-1 for salary and interest, ITR-2 for capital gains, ITR-3 for business income, etc.)
• Claim TDS credits appearing in the deceased's Form 26AS
• Refunds, if any, will be credited to the deceased's bank account (linked to their PAN) or can be redirected — consult your CA on the refund repatriation process

Verification of the ITR can be done electronically via the legal heir's Aadhaar OTP or net banking, or via a physical signed ITR-V sent to CPC Bengaluru within 30 days of filing.

What About Pending Tax Proceedings?

Any proceedings already initiated against the deceased before their death are deemed to have been initiated against the legal representative and may be continued from the stage at which they stood on the date of death. Scrutiny assessments, reassessments, appeals — all of them survive the taxpayer's death. The legal heir steps into those proceedings.

This is why early registration matters. Notices issued to the deceased's PAN that go unresponded due to unawareness can result in ex-parte assessments and demands. Prompt registration ensures the heir can log in, view the notice, and respond.

Compliance Checklist for Legal Heirs

The Takeaway

Register early, split the income correctly, and file before the ITR deadline applicable to regular taxpayers. If there's a refund due, filing is the only way to claim it. If there's a demand, early resolution prevents interest and enforcement action against the estate. Either way, this is one piece of compliance that cannot be deferred until "things settle down."

CA Praneeth Thunuguntla | Thunuguntla & Associates | Income Tax & GST Advisory