The CA’s Guide to Handling a Client’s Death: Tax, Claims & Documentation

You’ve built a relationship with a client over years. You know their income sources, their investment quirks, their habit of dropping off documents the day before the deadline. Then one morning, a family member calls and tells you they’re gone.

That phone call changes everything. Suddenly, you’re not just a tax professional. You’re one of the few people who understands the deceased’s full financial picture, and the family is counting on you to guide them through what comes next.

This isn’t taught in CA curriculum. Most practitioners figure it out the hard way, piecing together procedures across scattered CBDT circulars and portal documentation. So here’s a consolidated guide for everything you need to do when you get that call.

First Things First: The ITR for the Deceased

The Income Tax Act doesn’t stop caring about a person because they’ve died. Section 159 is clear: the legal representative of a deceased person is liable to pay any sum that the deceased would have been liable to pay if they had not died. That includes filing their final Income Tax Return.

Here’s what that means practically:

Who files? The legal representative. This is typically the legal heir, the executor named in the will, or the administrator appointed by a court. They step into the shoes of the deceased for tax purposes.

What period does it cover? April 1 of the financial year to the date of death. If your client died on September 15, 2025, the final ITR covers April 1, 2025 to September 15, 2025. Income earned after the date of death belongs to whoever inherits the assets, and they report it in their own return.

Which ITR form? The same form the deceased would have used. If they had salary and house property income, that’s ITR-2. If they had business income, ITR-3. Death doesn’t change the form, just the period.

What’s the deadline? Same as the regular deadline. For non-audit cases, July 31 of the assessment year. If the death occurs after the deadline has passed for a prior year, the legal representative should file it as soon as possible. There’s no special extension just because someone died.

One catch: You can’t use the deceased’s digital signature or login anymore. The legal heir has to register on the e-filing portal first.

Registering as Legal Heir on the e-Filing Portal

This is where most CAs hit their first roadblock. The family wants to file the return, but the portal won’t let them until the legal heir registration is approved.

Here’s the process, step by step:

1. Both PANs must be registered. The deceased’s PAN and the legal heir’s PAN should both be registered on the Income Tax e-filing portal. If the deceased never registered, the legal heir can create a profile on their behalf (this works only for individual assessees).

2. Log in with the legal heir’s credentials. Go to Authorized Partners > Register as Representative Assessee, and select “Register as Legal Heir.”

3. Enter the deceased’s details. PAN, name, date of birth, date of death.

4. Upload documents. The portal accepts any of the following:

   • Legal heir certificate issued by a court
   • Certificate of surviving family members from local revenue authority
   • Family pension certificate from a State or Central government body
   • Registered will

5. Submit and wait. The Income Tax Department typically processes these requests within 7 days. You’ll get a confirmation via email and SMS.

Once approved, the legal heir can switch to “Representative Assessee” mode on the portal and file the deceased’s ITR, view their past returns, and claim refunds.

Pro tip: If the documents are incomplete, the portal may approve a “Temporary Legal Heir” status instead of “Permanent.” Temporary status has the same filing capabilities, but you’ll want to submit the full documents eventually to avoid complications with refund processing.

What About the Deceased’s PAN?

This question comes up every time. Should we deactivate the PAN?

There’s no legal mandate to cancel a deceased person’s PAN. But here’s why you should recommend it: an active PAN can be misused for identity fraud, fake financial transactions, or fraudulent ITR filings claiming bogus refunds.

The process is straightforward but offline:

1. Write a letter to the Assessing Officer of the deceased’s jurisdiction.
2. Include the deceased’s PAN, name, date of birth, and date of death.
3. Attach a copy of the death certificate.
4. Submit it to the jurisdictional Income Tax office.

The department will verify that there are no pending demands, dues, or refunds against the PAN before deactivating it. This typically takes 10-15 days.

Critical sequence: File the final ITR and claim any pending refunds before requesting PAN deactivation. Once the PAN is deactivated, filing becomes impossible.

If you’re helping multiple family members with estate matters, consider using Anshin to organize the deceased’s financial information. It’s designed to make exactly this kind of situation less chaotic, giving families (and their CAs) a clear picture of all accounts, policies, and investments in one place.

Capital Gains on Inherited Assets: Section 49(1)

This is where clients get confused, and where your advice matters most. When a client inherits property, shares, or mutual funds, they inevitably ask: “Do I have to pay tax on this inheritance?”

The short answer: no. India has no inheritance tax. Receiving assets through a will or intestate succession is not a taxable event.

The longer answer: tax hits when the heir sells those assets. And the calculation of capital gains on inherited property works differently from a regular purchase.

Here’s how Section 49(1) works:

Cost of acquisition = previous owner’s cost. If your client’s father bought a flat in 2005 for Rs 30 lakh, and your client inherits it in 2025, their cost of acquisition is Rs 30 lakh. Not the market value at the time of inheritance. Not zero. The father’s original cost.

Holding period includes the previous owner’s period. For determining whether the gain is short-term or long-term, you count from when the previous owner bought it. In our example, the holding period started in 2005, not 2025. Since the heir has held it for more than 24 months (the threshold for immovable property), any sale would result in long-term capital gains.

Indexation starts from the previous owner’s purchase year. For properties acquired before July 23, 2024, the heir can use indexation from the year the previous owner bought the asset. If the father bought in 2005, you index from 2005-06.

A wrinkle for pre-2001 properties. If the previous owner acquired the asset before April 1, 2001, the cost of acquisition can be the actual cost or the Fair Market Value as of April 1, 2001, whichever is higher. This is significant for ancestral properties.

Post-July 2024 changes. For sales of property after July 23, 2024, the heir has a choice: 12.5% LTCG without indexation, or 20% with indexation, whichever results in lower tax. This applies only to assets originally acquired before July 23, 2024. For assets acquired after that date, it’s a flat 12.5% without indexation.

A Worked Example

Your client Priya inherits a property her mother bought in March 2010 for Rs 40 lakh. Priya sells it in January 2026 for Rs 1.5 crore.

• Cost of acquisition: Rs 40 lakh (mother’s cost)
• Holding period: March 2010 to January 2026 (nearly 16 years, long-term)
• Indexed cost (if using indexation): Rs 40 lakh x (CII of 2025-26 / CII of 2009-10)
• Capital gain: Sale price minus indexed cost
• Tax: Compare 12.5% without indexation vs 20% with indexation, choose the lower amount

This is exactly the kind of calculation where getting the details wrong costs your client real money.

TDS Certificates and Refund Claims

If the deceased had TDS deducted on income (salary, bank interest, rent) during the year of death, that TDS credit needs to be claimed. The legal heir files the final ITR, includes all TDS details from Form 26AS or AIS of the deceased, and claims the refund.

The refund, once processed, goes to the bank account linked to the legal heir’s PAN on the portal. Make sure the heir has:

• Updated their bank account details on the e-filing portal
• Linked their PAN to Aadhaar (mandatory for refund processing)
• Pre-validated the bank account on the portal

If the deceased has a refund pending from a previous year’s ITR, the legal heir can claim it after completing the legal heir registration. The refund gets reissued to the heir’s bank account.

For pending refunds where the original return was filed by the deceased, you may need to submit a formal request through the e-filing portal’s grievance section, referencing the legal heir registration.

Your Checklist: What to Do When You Get the Call

Here’s a practical sequence for CAs. Print this out or save it somewhere accessible, because you won’t be thinking clearly in the moment either.

Week 1: Immediate Steps

• Obtain the death certificate (multiple certified copies)
• Secure a list of all financial accounts, insurance policies, and investments. If the client used Anshin, this is already organized for you
• Identify the legal heir or executor
• Begin legal heir certificate application if one doesn’t exist

Month 1: Portal and Registration

• Register the legal heir on the e-filing portal
• Download the deceased’s Form 26AS, AIS, and TIS for the year of death
• Collect all TDS certificates from employers, banks, and tenants
• Review the deceased’s previous ITRs for ongoing obligations (advance tax, carried-forward losses)

Before the ITR Deadline: Filing

• Compute income from April 1 to date of death
• File the deceased’s final ITR through the legal heir’s login
• Claim any TDS refunds in the final ITR
• Advise heirs on capital gains implications if they plan to sell inherited assets

After Filing: Cleanup

• Follow up on refund processing
• Write to the Assessing Officer to deactivate the deceased’s PAN
• Advise heirs to file their own ITR including any income from inherited assets post date of death
• Help with transmission/death claims across financial institutions

Building a Better Practice

Handling a client’s death well is a trust multiplier. The family remembers the CA who showed up with a clear plan, who didn’t fumble with procedures, who made a terrible time slightly less terrible. That family stays with you. Their friends and relatives come to you.

Consider building a standard operating procedure for your firm. Document the steps, keep template letters ready (for PAN deactivation, for the Assessing Officer, for banks), and maintain a checklist you can hand to the family at the first meeting.

The clients you serve in their worst moments become your strongest advocates.

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Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws and procedures change frequently. Always verify current rules on the Income Tax e-filing portal and consult with a qualified professional for specific situations. The information here is accurate as of February 2026 based on the Income Tax Act, 1961 and applicable CBDT notifications.