How to close deceased's income tax file, settle liabilities

Even if people die, they are not exempt from tax under the Income Tax Act. Rather, the tax assessment process continues, and the taxpayer's legal representative must take the necessary steps to settle the tax.
Closing the income tax file of a taxpayer after death and paying the outstanding tax is an important and indispensable activity.

However, as many legal representatives are not aware of the process, the deceased person's tax file is not closed, the return is not filed on time, or other administrative complications lead to the imposition of fines.

First, if a taxpayer dies, his/her legal representative or executor must take charge of the tax file. The representative must inform the income tax office of the death and receive a notice from the deputy commissioner of taxes.

After that, the representative or the appointed executor must take the necessary steps to settle the income tax liability and close the file.

The representative must register his name in the income tax office so that the deceased's tax file comes under his responsibility.

Then, the last income tax return of the deceased should be submitted to settle the tax liability.

A legal representative can be an executor, administrator, or any person who manages the estate of a deceased person. This provision plays an important role in determining the tax liability of the deceased.

According to Section 194 of the Income Tax Act of Bangladesh, if a person dies, his legal representative bears the responsibility of paying his income tax. That is, the income tax liability of the deceased will be recovered only through his legal representative.

In this case, the deputy commissioner of taxes shall issue a notice to the representative before commencing proceedings.

After the death of the taxpayer, the legal representative must apply to the income tax authority for cancellation of the deceased's income tax registration under Section 262 of the Income Tax Act, after paying the tax liability.

Upon receiving this application, the income tax authorities will scrutinise it. To cancel the registration, the authorities must ensure that the deceased has paid all outstanding taxes, that no tax assessment process or appeal is underway, and that the information provided in the application form is correct and verified.

If the legal representative does not close the deceased's income tax file in a timely manner, penalties or other financial consequences may arise.

Therefore, it is important to follow the provisions of the Income Tax Act to avoid legal complications or financial losses in the future.

According to Section 227, the legal representative, trustee, guardian, or receiver of the deceased can claim money on his behalf.

Closing the deceased's tax file and settling his income tax liability is an important responsibility of the legal representative.

Thus, it is crucial to properly implement the legal provisions in determining the income tax of the deceased and collecting the dues. Through this, the heirs or legal representatives of the deceased will receive clear guidance in meeting the income tax liability, making the income tax system more transparent and effective.

The writer is an FCA and a financial sector analyst. He can be reached at faysal.aqc@gmail.com