Taxation of a Deceased Person: Executor and Legal Heir Under the Income Tax Act 2025

When a person dies, two different tax questions arise. First, the tax the deceased would have owed had they lived: that falls on the legal representative under section 302, capped at what the estate can pay. Second, the income the estate earns after death: that is taxed in the hands of the executor under section 312, as an individual if there is one executor and as an association of persons if there are several.

This guide explains who is an executor, how the estate is assessed year by year, what is excluded when income is handed to a legatee, and how far a legal representative's liability goes. Every point is taken from the Income-tax Act, 2025 as amended by the Finance Act, 2026, with the section number alongside. Examples use tax year 2026-27. This is information, not advice for a specific estate.

Who is an executor under the Income Tax Act 2025?

Section 312(3) says "executor" includes an administrator or any other person administering the estate of a deceased person. So the label does not depend on a will. Whoever is actually administering the estate is treated as the executor for this section.

How is the income of a deceased person's estate taxed?

Section 312(1) charges the income of the estate to tax in the hands of the executor:

Number of executors	Taxed as	Source
One	An individual	Section 312(1)
More than one	An association of persons	Section 312(1)

The executor's own income is not mixed in. Section 312(4) requires the assessment under this section to be made separately from any assessment on the executor's own income.

Which residential status applies to the estate?

Section 312(2) treats the executor as resident or non-resident according to the residential status of the deceased for the tax year in which the death took place. The executor's own residence does not matter for the estate's income.

For which years is the estate assessed?

Section 312(5) requires separate assessments on the total income of each completed tax year, or part of a tax year, from the date of death until the estate is completely distributed to the beneficiaries according to their several interests.

What happens when estate income is given to a legatee?

Section 312(6) says income of the estate for a tax year that is distributed to, or applied to the benefit of, a specific legatee during that same tax year is excluded from the executor's total income. The same amount is then included in the total income of that legatee for that tax year. A specific legatee is a person named to receive a particular share or item under the will.

Worked example 1: estate income split between executor and legatee

Assumptions: Mr. Rao dies on 10 August 2026. His son Ravi is the only executor. In tax year 2026-27 the estate earns Rs 1,80,000 interest and Rs 2,40,000 rent after death. During the same tax year Rs 1,50,000 of that income is paid to Meena, a specific legatee under the will.

Step	Amount (Rs)
Interest earned by the estate	1,80,000
Rent earned by the estate	2,40,000
Estate income for 2026-27 (1,80,000 + 2,40,000)	4,20,000
Less: distributed to Meena in 2026-27 (section 312(6))	1,50,000
Total income in Ravi's hands as executor	2,70,000
Added to Meena's own total income for 2026-27	1,50,000

Ravi's own salary and other income are assessed separately (section 312(4)). Had the Rs 1,50,000 reached Meena only in the next tax year, it would not qualify for the exclusion in 2026-27.

How far is a legal representative liable for the deceased's tax?

Section 302(1) makes the legal representative liable to pay any sum the deceased would have owed had they not died, in the same manner and to the same extent. "Legal representative" has the meaning in section 2(11) of the Code of Civil Procedure, 1908 (section 2(65) of the Act).

• Proceedings continue. A proceeding already taken against the deceased is deemed taken against the legal representative and continues from the stage it had reached. A proceeding that could have been taken against the deceased can be taken against the legal representative, including assessment, reassessment or recomputation under section 279 (section 302(2)).
• Deemed assessee. The legal representative is deemed an assessee (section 302(3)).
• Liability is capped by the estate. It is limited to the extent the estate is capable of meeting the liability (section 302(4)).
• The cap falls away if assets are disposed of. If, while the tax remains unpaid, the legal representative creates a charge on, disposes of or parts with estate assets, they become personally liable, limited to the value of the asset charged, disposed of or parted with (section 302(5) and (6)).
• Recovery from the estate. Sections 304(2), 304(5) and 305 apply so far as consistent (section 302(7)). Section 305 lets a person who pays tax in a representative capacity recover it from the person on whose behalf it is paid, or retain it from money in their hands.

Worked example 2: the cap on liability

Assumptions: Mrs. Iyer dies owing Rs 3,00,000 of tax for earlier years. Her estate is worth Rs 2,20,000. Her son Arun is the legal representative.

Situation	Arun's liability
Arun keeps the estate intact and pays from it	Rs 2,20,000, the most the estate can meet (section 302(4)). The balance of Rs 80,000 (3,00,000 minus 2,20,000) is not recoverable from his own pocket.
Before paying, Arun gives away an estate asset worth Rs 60,000	The remaining estate of Rs 1,60,000 (2,20,000 minus 60,000) meets part of the demand, and Arun is personally liable up to Rs 60,000, the value of what he parted with (section 302(5) and (6)). His own assets are reachable only up to that Rs 60,000.

Real-life scenarios

A pending scrutiny. Sunil is under assessment when he dies. His widow Kavita is the legal representative. The proceeding is deemed to have been taken against her and carries on from the stage it reached (section 302(2)(a)). She does not restart it, and she answers for it only up to what Sunil's estate can pay.

Two executors. Meena and her brother Dev are both named executors of their mother's will. Because there is more than one, the estate is assessed as an association of persons (section 312(1)). Each of them is separately assessed on personal income (section 312(4)).

Does a legal representative have to file the deceased's return?

Section 263(1)(a) requires a person to furnish a return of their income or the income of any other person in respect of which they are assessable in the tax year, once total income crosses the limit that is not chargeable to tax. Because section 302(3) deems the legal representative an assessee, the return for the deceased's income up to the date of death is filed by the legal representative, not by the deceased. The estate's income after death is a separate matter handled under section 312, as above.

What if the deceased was a partner, or recovery had already started?

• Firms and associations. The legal representative of a deceased partner is jointly and severally liable, along with the surviving partners, for the firm's tax for the year (section 329). The same wording applies when a firm or an association of persons is discontinued or dissolved (sections 330(3) and 321(3)).
• Business losses. Section 119(2) bars carry forward of a loss by anyone other than the person who incurred it where the business passes to another person, but the bar applies only to succession "otherwise than by inheritance". An heir who inherits the business is therefore outside that bar.
• Recovery. Under rule 225(87), a recovery proceeding against a defaulter who dies after the certificate is drawn up can be continued against the legal representative.

Common mistakes

• Merging the estate's income into the executor's own return. Section 312(4) requires separate assessment.
• Using the executor's residential status. Section 312(2) uses the deceased's status for the tax year of death.
• Excluding income given to a legatee in a later tax year. The exclusion in section 312(6) is for distribution during the same tax year.
• Distributing the estate before settling the deceased's tax. This can create personal liability under section 302(5).
• Assuming proceedings lapse on death. Section 302(2) lets them continue against the legal representative.

Quick reference

Question	Answer	Provision
Who is taxed on estate income?	The executor	312(1)
In what capacity?	Individual (one executor) or AOP (several)	312(1)
Residential status?	That of the deceased in the tax year of death	312(2)
Separate from own income?	Yes	312(4)
Assessment period?	Each tax year or part, from death to complete distribution	312(5)
Income paid to a specific legatee in the year?	Excluded from executor, taxed in legatee's hands	312(6)
Legal representative's liability?	Limited to the estate; personal if assets are disposed of	302(4) to (6)

Where this is in the Act

• Section 312: executors (all sub-sections above)
• Section 302: legal representative
• Sections 304 and 305: representative assessee, liability and right of recovery
• Section 2(65): definition of legal representative

Estates run across several tax years, with separate assessments and legatee-wise distributions to track. Finexo's practice management software helps a CA firm keep each estate's yearly filings and deadlines in one place. It does not compute tax or file returns for you. For the deadline side of any return, see our guide on return filing and due dates under the 2025 Act.