IT Act 2025
Section 312
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.
(2) For the purposes of this Act, 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.
(3) For the purposes of this section, “executor” includes an administrator or other person administering the estate of a deceased person.
(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.
(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.
(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.
(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.
Analysis
Section 312 of the Income-tax Act, 2025, which governs taxation of the estate of a deceased person. This provision is important for both taxpayers (legal heirs, executors, and beneficiaries) and Assessing Officers (AOs) to ensure smooth administration and tax compliance during the transition period after a person’s death.
1. Purpose of the Provision: When a person dies, his assets, properties, and ongoing businesses form an estate.
. Until the estate is fully distributed among beneficiaries, it may continue to generate income (e.g., rent, interest, dividends, or business profits).
Section 312 ensures that this income is taxed appropriately during the administration period so that:
. The estate does not become a tax shelter,
The executor is clear about their tax obligations, and
Beneficiaries are taxed only on what they specifically receive.
2. Key Terms:
Term
Meaning
Executor
A person legally appointed to administer the estate of a deceased individual under a will or court order. Includes an administrator or any person managing the estate.
Estate of a deceased person
All property, assets, rights, and obligations of a deceased individual, including businesses, investments, and liabilities.
Specific legatee
A beneficiary who is clearly identified and entitled to a specific portion of the estate (e.g., “Mr. A will receive House No. 15”).
Period of administration
Time from death of the person to final distribution of the estate among beneficiaries.
3. Sub-Section Wise Explanation:
(i) Sub-section (1): Status of Executor for Taxation:
“The income of the estate 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.”
Implication:
i. Single Executor → Taxed as an individual.
ii. Multiple Executors → Taxed as an AOP (Association of Persons).
Why Important:
i. Determines the applicable tax rates and slabs.
ii. Avoids confusion about treating estate income as that of beneficiaries until distribution.
Example: Mr. X dies leaving two executors, Mr. A and Mr. B.
i. Income of estate = ₹12,00,000
Estate is taxed as an AOP, not in the names of A and B separately.
(ii) Sub-section (2): Residential Status of Executor:
“Executor’s residential status is same as that of the deceased person in the year of death.”
Purpose: Prevents manipulation where a non-resident executor tries to claim non-resident benefits.
Example:
i. Deceased was resident and ordinarily resident in India.
ii. Even if the executor is a non-resident, the estate is treated as resident for that year.
(iii) Sub-section (3): Definition of Executor: Includes administrator or any other person administering the estate.
Implication:
i. Even if there is no formal will and a court-appointed administrator manages the estate, this section applies.
ii. Prevents escape from taxation due to technicalities of appointment.
(iv) Sub-section (4): Separate Assessment of Executor:
“The assessment of executor is separate from his personal income.”
Practical Meaning:
i. The executor files two separate tax returns:
a. His personal return, covering his personal salary, business, etc.
b. Estate return, covering income earned by the estate.
Benefit to Executor: Protects the executor’s personal liability from being mixed with estate liabilities.
(v) Sub-section (5): Separate Assessments for Each Year: Tax is computed separately for each tax year from: Date of death → Till full distribution of estate.
Example:
i. Mr. Z dies on 15th September 2025.
ii. Distribution completed on 10th August 2027.
iii. Assessments:
a. FY 2025-26 → From 15-09-2025 to 31-03-2026.
b. FY 2026-27 → Full year.
c. FY 2027-28 → From 01-04-2027 to 10-08-2027.
Purpose: Clear accounting of income generated year-wise.
(vi) Sub-section (6): Exclusion of Income Distributed to Specific Legatees: “Income distributed or applied to a specific legatee is excluded from executor’s taxable income, but taxed in legatee’s hands.”
Implication:
i. Avoids double taxation.
ii. Executor reports only undistributed income.
Example:
i. Estate earns ₹10,00,000 in FY 2025-26.
ii. ₹3,00,000 distributed to Ms. P (specific legatee).
a. Executor taxed on ₹7,00,000.
b. Ms. P taxed on ₹3,00,000 as her personal income.
(vii) Sub-section (7): Application of Section 305: Section 305 (Representative Assessee) rules apply to the executor for:
i. Collection and recovery of tax,
ii. Protection of executor when acting in good faith.
(viii) Practical Meaning:
i. The executor acts as a trustee for tax purposes.
ii. Liabilities are limited to estate assets, not his personal property, if he acts properly.
4. Rights and Duties:
A. For Taxpayers (Executors and Beneficiaries):
Rights
Executor has the right to file separate estate returns.
Specific legatees are taxed only on income actually distributed to them.
Executor’s personal wealth not at risk if he complies with Section 305.
Beneficiaries can claim credit for TDS deducted by executor on their behalf.
Duties
Maintain complete records of all estate income and distributions.
Executors must deduct and deposit taxes before distributing funds.
Inform AO about completion of distribution to close estate assessment.
Executors must report legatees’ details accurately to avoid mismatches.
B. For Assessing Officers (AOs):
Responsibilities
Ensure estate income is taxed during administration period.
Prevent double taxation between estate and legatees.
Apply correct status (individual/AOP) based on number of executors.
Enforce Section 305 to recover tax dues.
Practical Steps
Verify will, court documents, bank records, and income sources.
Cross-check distributions with beneficiaries’ returns.
Ask for executor details during filing.
Issue notices to executor as representative assessee.
5. Workflow of Estate Taxation:
(i) Step 1: Determine date of death and appoint executor(s).
(ii) Step 2: Classify entity: Single executor → Taxed as Individual. Multiple executors → Taxed as AOP
(iii) Step 3: Identify income of estate: → Separate income distributed to legatees vs retained income.
(iv) Step 4: File return: → Separate estate return under PAN of executor/AOP.
(v) Step 5: Year-wise assessments until final distribution completed.
(vi) Step 6: Upon completion, AO closes estate assessment and shifts to direct taxation of beneficiaries.
6. Illustrative Example:
(i) Facts:
i. Mr. K dies on 1st July 2025.
ii. Estate earns:
a. FY 2025-26 → ₹15,00,000
b. FY 2026-27 → ₹18,00,000
iii. ₹5,00,000 distributed to specific legatees in FY 2025-26.
(ii) Tax Treatment:
i. FY 2025-26:
a. Executor taxed on ₹10,00,000 (₹15,00,000 – ₹5,00,000 distributed).
b. Legatees taxed on ₹5,00,000 individually.
ii. FY 2026-27: Entire ₹18,00,000 taxed in executor’s hands if undistributed.
7. Common Issues and Solutions:
Issue Solution
Delay in filing separate PAN for estate. Apply immediately to avoid penalties.
Confusion between executor’s personal Maintain two distinct sets of books.
income and estate income.
Beneficiaries taxed again on income Provide Form 26AS and distribution already taxed in estate certificates.
Multiple executors filing separate returns. Combine into a single AOP return.
8. Summary Table:
Sub-section
Key Rule
Benefit/Impact
312(1)
Single executor → Individual; Multiple → AOP
Decides applicable tax rates
312(2)
Status same as deceased in year of death
Prevents tax planning abuse
312(3)
Executor includes administrator
Wider coverage
312(4)
Separate assessment from executor’s personal return
Liability separation
312(5)
Year-wise assessments until final distribution
Transparency
312(6)
Distributed income excluded from executor’s return
Avoids double taxation
312(7)
Section 305 rules apply
Executor protected when acting lawfully
9. Conclusion: Section 312 provides a clear and structured mechanism for taxing the estate of a deceased person during the transition phase:
For executors, it defines roles, protects personal liability, and guides compliance.
For beneficiaries, it ensures they are taxed only on what they actually receive.
For AOs, it creates a transparent framework to track estate income, avoid tax evasion, and ensure fair taxation.
By strictly following this section, both taxpayers and tax authorities can avoid disputes, ensure timely revenue collection, and provide certainty to beneficiaries during the sensitive process of estate settlement.
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