How to pay tax on income if person died intestate?

My deceased father left behind fixed deposits and shares. My brother and I are the legal heirs, but we have yet to get the assets as he died intestate. He died in January 2025, and the deposits and mutual funds (MFs) continue to earn interest and dividends, respectively. We don't expect the assets to be transferred to us anytime soon, as we are stuck in legal processes. How will the interest and dividends be taxed in the interim from my father's death till transmission, and how should they be reported? Say, if we don't get the assets even in FY26, what will be the tax implications?

As per the provisions of the Income Tax Act, in the event of a person's death, the legal representative is liable to discharge any tax liability that the deceased would have been liable to pay, as if they had not died.

Further, in case an executor is appointed, the income of the estate of a deceased person is chargeable to tax in the hands of the executor, from the date of demise to the date of complete distribution to the beneficiaries of the estate, as per the procedure specified.

In your case, it is assumed that no will was executed and no executor or administrator has been appointed for your father’s estate. Upon your father’s demise, your brother and you are the legal heirs with defined shares, as per the succession law applicable to you. The delay in the actual transmission of assets to your names is only due to the time taken for the procedures.

Hence, tax on the income earned up to the date of demise of your father in January 2025, would be payable by his legal representative and should be reported in the final return filed under your father’s permanent account number (PAN), by his legal representative.

Considering there is no separate executor and your brother and you are the legal heirs, subsequent incomes earned after the date of his demise may be offered to be taxed in your respective hands, in proportion to your shares. This is irrespective of whether the transmission is pending or completed.

Considering the nature of the income, i.e., interest, dividend, etc., the same shall be taxable under the head “Income from Other Sources” for the relevant financial year.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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