Tax planning after death of a person

My father was meticulous in his financial planning and ensured that all his assets were joint holdings. He had also named nominees in all investments and even made a detailed will. I was devastated when he died in 2021, but the steps he had taken during his lifetime ensured that his family inherited his assets without any hassles.

However, the financial issues don’t end with the distribution of the assets of the deceased. The tax liability of the individual cannot be ignored, and has to be borne by his legal heirs. As a first step, a legal representative might have to file the tax return on behalf of the dead person for the year in which he died.

Filing the tax return is mandatory if the gross total income from all sources is above Rs.2.5 lakh for individuals below 60 years, Rs.3 lakh for those between 60 and 80 years and Rs.5 lakh for super senior citizens above 80 years.

In case there are any tax dues, the legal representative has to pay the outstanding amount. However, this recovery cannot be more than the amount inherited by the legal representative from the deceased taxpayer.

While the dead person is entitled to all the deductions and exemptions for the entire year, tax is levied only on the income earned till his death. The income earned on investments after the death of the person is treated as the income of the legal heirs and they are taxed for it as per their tax slabs.

The tax issues don’t end here. After filing the tax return, the PAN card of the deceased person will have to be surrendered to the tax department. The legal representative must write to the assessing officer under whose jurisdiction the PAN was registered, explaining the reasons for surrendering the PAN and a certified copy of the death certificate.(THE WRITER IS SENIOR VICE PRESIDENT, FAMILY OFFICE SERVICES DIVISION OF CATALYST TRUSTEESHIP LTD)

My father was very thorough in managing his finances, ensuring that all his assets were held jointly. He also designated nominees for all his investments and created a detailed will. His passing in 2021 was heartbreaking, but his careful planning made sure that his family received his assets smoothly.

However, dealing with financial matters doesn’t end with the division of the deceased’s assets. The tax responsibilities of the individual cannot be overlooked and must be taken on by his legal heirs. Initially, a legal representative may need to file the deceased person’s tax return for the year of their passing.

Filing the tax return is required if the total income from all sources exceeds Rs.2.5 lakh for individuals under 60, Rs.3 lakh for those between 60 and 80, and Rs.5 lakh for super senior citizens over 80.

If there are any outstanding taxes, the legal representative must settle the amount due. However, this payment cannot exceed the inheritance received from the deceased taxpayer.

Although the deceased is eligible for all deductions and exemptions for the entire year, tax is only levied on income earned up to their passing. Any income generated from investments after their death is considered the legal heirs’ income and taxed based on their individual tax brackets.

The tax obligations continue as the PAN card of the deceased must be surrendered to the tax department after filing the tax return. The legal representative should contact the assessing officer for the registered jurisdiction of the PAN, providing an explanation for surrendering the PAN along with a certified copy of the death certificate.(The writer is Senior Vice President, Family Office Services Division of Catalyst Trusteeship Ltd)