In case a person dies without leaving any valid Will, in respect of the assets owned by him, he is said to have died intestate to that extent
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Question: My father passed away a few years back without a Will, leaving behind three children (two married sons and one married daughter). Our mother had passed away earlier long back. We have not been able to distribute the assets among ourselves to date. What are the consequences as we have not filed any ITR for him after his death? We also have not been able to withdraw the balances in the PPF account and bank fixed deposits nor we have been able to lodge an insurance claim with the insurance company. Can you please tell us how the income tax on father’s assets would affect us if we do not do the distribution for say another 10 years? Are there any income tax penalties for delaying the distribution? - Ramesh Chaudhary
Answer: In case a person dies without leaving any valid Will, in respect of the assets owned by him, he is said to have died intestate to that extent. In case of an intestate death, the personal law of the deceased applies as regards who Will inherit the property of the deceased and how much. In case of intestate death of a Hindu, succession to the assets owned by the deceased is governed by the Hindu Succession Act, 1956. In the case where no valid Will is left by the deceased, all the assets pass on to the heirs immediately at the time of his death without anything required to be done by anyone.
As per the schedule of the Hindu Succession Act you all three are entitled to an equal share in all the assets owned by your father as your mother was not alive at the time of death of your father. Since you all became owner of the property immediately after the death of your father, the question of keeping the distribution of assets pending does not arise and you should have included the respective income from different assets in your respective income tax return (ITR). You have to include such income in your ITR as to whether the assets have actually been divided or not amongst the beneficiaries.
As far as ITR of your father is concerned, you were required to file an ITR for the period from the 1 st April of the year to death till the date of death as legal representative of your father in respect of income till date of his death and thereafter there is not need to file any ITR in respect of income from assets owned by your father since all the assets had vested in the legal heirs immediately on his death. Since one cannot file an ITR beyond one year, you cannot file your old ITR now. In case the Income Tax department comes to know about it, it can issue you a notice and in that case, you may have to pay tax and interest on the income relatable to your share in the assets of your deceased father in addition to a penalty between 50% to 200% of such tax liability.
Balwant Jain is a tax and investment expert and can be reached at firstname.lastname@example.org and @jainbalwant on Twitter.