Income Tax 2025

Appearance

5.—Executors

Executor. ​

312(1) ​

The income of the estate of a deceased person shall be chargeable to tax in the hands of the executor as an individual, if there is only one executor, or as an association of persons, if the executors are more than one.

312(2) ​

The executor shall be deemed to be resident or non-resident according to the residential status of the deceased person for the tax year in which his death took place.

312(3) ​

For the purposes of this section, “executor” includes an administrator or other person administering the estate of the deceased person.

312(4) ​

The assessment of an executor under this section shall be made separately from any assessment that may be made on him in respect of his own income.

312(5) ​

Separate assessments shall be made under this section on the total income of each completed tax year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests.

312(6) ​

In computing the total income of any tax year under this section, any income of the estate of that tax year distributed to, or applied to the benefit of, any specific legatee of the estate during that tax year shall be excluded; but the income so excluded, shall be included in the total income of the tax year of such specific legatee.

312(7) ​

The provisions of section 305 shall, so far as may be, apply in the case of an executor in respect of tax paid or payable by him, as they apply in the case of a representative assessee.

Explanation

Section Summary: ​

This section (Section 312) governs how the income of a deceased person's estate is taxed when managed by an executor. It outlines the tax treatment of the estate's income, the residential status of the executor, and the process for assessing and distributing income to beneficiaries. The section ensures that the estate's income is taxed appropriately during the period between the deceased's death and the complete distribution of the estate.

Key Changes: ​

  1. Clarification on Executor's Role: The section explicitly defines "executor" to include administrators or any person managing the estate, ensuring broader applicability.
  2. Residential Status: The executor's residential status is tied to the deceased person's residential status in the year of death, simplifying tax residency determination.
  3. Separate Assessments: The estate's income is assessed separately from the executor's personal income, ensuring clarity in tax liability.
  4. Income Distribution Rules: Income distributed to specific legatees during the tax year is excluded from the estate's taxable income but included in the legatee's income.

Practical Implications: ​

  1. For Executors: Executors must file separate tax returns for the estate and ensure proper reporting of income distributed to beneficiaries.
  2. For Beneficiaries: Beneficiaries receiving income from the estate must include it in their taxable income for the relevant year.
  3. Compliance Burden: Executors must maintain detailed records of income distribution and ensure timely tax payments for the estate.

Critical Concepts: ​

  1. Executor: Includes administrators or any person managing the estate of the deceased.
  2. Residential Status: The executor is deemed resident or non-resident based on the deceased's status in the year of death.
  3. Specific Legatee: A beneficiary entitled to a specific portion of the estate's income or assets.
  4. Separate Assessments: The estate's income is assessed independently of the executor's personal income.

Compliance Steps: ​

  1. File Separate Returns: Executors must file tax returns for the estate separately from their personal returns.
  2. Track Income Distribution: Maintain records of income distributed to beneficiaries during the tax year.
  3. Determine Residential Status: Use the deceased's residential status in the year of death to determine the executor's status.
  4. Exclude Distributed Income: Ensure income distributed to specific legatees is excluded from the estate's taxable income but reported in the legatee's income.

Examples: ​

  1. Single Executor: Mr. A is the sole executor of his father's estate. The estate earns ₹10 lakh in a tax year. Mr. A must file a tax return for the estate, reporting ₹10 lakh as taxable income. If ₹2 lakh is distributed to a specific legatee during the year, the estate's taxable income reduces to ₹8 lakh, and the legatee must include ₹2 lakh in their personal income.
  2. Multiple Executors: Ms. B and Mr. C are co-executors of their mother's estate. The estate earns ₹15 lakh in a tax year. They must file a return as an association of persons (AOP) for the estate. If ₹5 lakh is distributed to a specific legatee, the estate's taxable income is ₹10 lakh, and the legatee includes ₹5 lakh in their income.

This section ensures proper tax treatment of estate income and clarifies the responsibilities of executors and beneficiaries.