ITR filing: Can an heir be held liable for paying income tax dues of their deceased father?

My father retired from government service, he has been getting pension but hasn’t filed Income Tax Return (ITR) for 15 years. He is 75-years-old now. What are the implications if he passes away without having filed ITR? Will his son have to file the ITR with a penalty? If yes, then how will government trace his son as PAN cards only have the father’s details, not the son’s?

- Name withheld on request 

Reply by Maneet Pal Singh, Partner, I.P. Pasricha & Co  

It is pertinent to note that there will be tax implications if your father doesn’t file an ITR. First, you must guide him to fill in all ITR forms and clear any dues. This will ensure all his income has been reported promptly and that no liability falls on his son after his demise.  

However, the tax implication on the son will arise after the death of his father if the son is the only legal heir. Further, the tax implications on the son will arise only if the pension income constitutes taxable income, i.e., exceeding the basic exemption limit of those respective years. The income tax (I-T) department can open the case under section 147 of the Income Tax Act for retrospective years and bring the income chargeable to a tax of such years in the hands of a legal heir, and thus consequent penalty under section 270, 270A can be levied by the department. The legal heir will have to file returns and pay taxes in respect of the deceased’s estate, which is in or may come into his possession, i.e., he may inherit from the deceased person. 

So the I-T department sometimes issues notice in case of non-filing of ITR, claiming it to be misreporting or not reporting it at all. In cases of underreported income falling under misreporting of income, the penalty shall be 200% of the tax payable on such misreporting of income. For the current year penalty under section 234F, you may have to pay Rs 5,000–10,000 if your income exceeds Rs 5 lakh. 

Thus, it becomes crucial for all retirees to file ITR, especially those whose income is above Rs 5 lakh or who gets income from other sources. This will help his son be free from any penalty or charges he would need to pay after his father dies.  

(Views expressed by the investment expert are his/her own.)