Income tax after death: Who pays the dues of a deceased taxpayer, and what Section 302 says

What happens when a taxpayer dies? Is he/she still liable to pay tax? Who will pay the tax? When someone dies, their financial life does not simply reset to zero. Any income they earned up to that point is still considered taxable, and any pending tax dues don’t get wiped out.

What Section 302 of the Income Tax Act 2025 says

Under Section 302 of the Income-tax Act, 2025, the legal representative is responsible for fulfilling the tax obligations of the deceased.

"Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased."

The law further clarifies that: “The legal representative of the deceased shall be deemed to be an assessee for this Act.”

Liability limited to estate of the deceased

The legal heir’s responsibility is not unlimited. It is generally restricted to the assets left behind by the deceased.“...the liability of a legal representative shall be limited to the extent to which the estate of the deceased is capable of meeting the liability,” the law says.

This ensures that tax recovery is made from the estate and not from the personal income of the legal heir.

"Income earned up to the date of death must be reported in the deceased’s PAN through a return filed by the legal heir. Income arising after death is reported separately, either under the legal heir’s PAN or the estate’s PAN, depending on the situation. The legal heir is also required to handle ongoing tax notices, assessments, and dues of the deceased, but liability is generally limited to the value of inherited assets and not the heir’s personal wealth," said Kinjal Bhuta, Treasure at (BCAS) Bombay Chartered Accountants' Society.

When legal heir can become personally liable

If the legal representative transfers, disposes of, or distributes estate assets without clearing outstanding tax dues, they may become personally liable but only to the extent of those assets.

For example, if the deceased owed ₹2 lakh in taxes but the heir inherited assets worth ₹1.5 lakh, the heir's liability would typically be limited to ₹1.5 lakh.

"To file the return, the legal heir must first register as a legal heir (representative assessee) on the Income Tax e-filing portal by submitting documents such as the death certificate, PAN of the deceased, PAN of the legal heir, and proof of legal heirship. Once approved, the legal heir can file returns, respond to notices, claim refunds, and complete other tax compliances on behalf of the deceased," explained CA Abhishek Soni.

So, while tax liability doesn’t disappear after death, it is handled in an orderly way through the estate. The dues are cleared first from what they leave behind, so the family isn’t personally burdened beyond the assets they inherit.