The Federal Board of Revenue (FBR) has outlined the income tax treatment of deceased individuals and their estates for Tax Year 2027 under Section 87 of the Income Tax Ordinance, 2001.
The provision establishes how outstanding tax liabilities, estate income and tax proceedings are handled after the death of an individual.
Tax Liability After Death
Under Section 87, the legal representative of a deceased individual is responsible for:
- Tax that the deceased would have been liable to pay if they had not died.
- Tax payable on income earned by the deceased person’s estate.
However, the legal representative’s liability is limited to the extent that the deceased person’s estate is capable of meeting the tax liability.
The Income Tax Ordinance also provides that the tax liability is a first charge on the deceased person’s estate, subject to applicable legal provisions.
Tax Proceedings Can Continue
The death of a taxpayer does not automatically end existing or potential income tax proceedings.
Proceedings that were already initiated against the deceased can continue against the legal representative from the stage reached at the time of death. Proceedings that could have been initiated against the deceased may also be initiated against the legal representative.
Who Is a Legal Representative?
For income tax purposes, a legal representative generally means a person who legally represents the estate of the deceased.
The definition can also include a person who intermeddles with the deceased’s estate or a person upon whom the estate devolves in certain representative proceedings.
What This Means for Families and Estates
Outstanding tax matters should be reviewed as part of the administration of a deceased person’s estate.
Legal representatives may need to address:
- Outstanding income tax liabilities
- Income generated by the estate
- Pending tax proceedings
- Applicable tax filings and documentation
- Settlement of tax obligations before distribution of estate assets
Understanding these obligations can help legal representatives manage the deceased person’s tax affairs in accordance with Pakistan’s income tax law.
Xact Legal – Tax & Legal Support
Managing the tax affairs of a deceased individual can involve both tax compliance and estate-related legal matters.
Xact Legal provides professional tax and legal services in Pakistan, assisting individuals, families and businesses with income tax compliance, tax matters and related legal requirements.
Need assistance with deceased estate tax matters or Tax Year 2027 compliance? Contact Xact Legal for professional guidance.