Section 312 Income Tax Act 2025: How Is a Deceased Person's Estate Taxed?
Section 312 governs the assessment of income earned by a deceased person's estate during administration. The executor is assessed in a representative capacity until the estate is completely distributed to its beneficiaries.
What does Section 312 provide?
Income generated by an estate after a person's death may remain taxable while the executor collects assets, pays liabilities and distributes the estate. Section 312 identifies the person assessed, the relevant residential status, the period of assessment and the treatment of income applied for a specific beneficiary.
It is important to distinguish income arising after death from income earned by the deceased before death. Section 302 deals with liability of legal representatives for the deceased person's tax obligations; Section 312 specifically governs income of the estate during administration.
Section 312 explained subsection by subsection
Section 312(1): Taxation of income in the executor's hands
Income of the estate is chargeable in the hands of the executor. Where there is one executor, the executor is taxed as an individual in that capacity. Where there are multiple executors, they are taxed as an association of persons in that capacity. This classification concerns estate income, not necessarily their personal earnings.
Section 312(2): Residential status
For purposes of the Act, the executor is deemed resident or non-resident according to the deceased person's residential status for the tax year in which death occurred. The executor's own personal residential status does not replace this statutory deeming rule for estate assessment.
Section 312(3): Who is an executor?
The term executor expressly includes an administrator or another person administering the estate of the deceased. It is therefore not confined to an individual expressly named as executor in a will.
Section 312(4): Separate assessment
Assessment of the executor in respect of estate income must be separate from any assessment of that same person for personal income. Proper separation of estate accounts and personal transactions is therefore important.
Section 312(5): Period of estate assessment
Separate assessments are required for each completed tax year, or relevant part of a tax year, between the date of death and the date of complete distribution of the estate to beneficiaries according to their interests. The provision is not limited to the year in which death occurs.
Section 312(6): Income distributed to a specific legatee
Estate income of a tax year distributed to, or applied for the benefit of, a specific legatee during that year is excluded from the executor's estate income computation for that year. The excluded amount is instead included in the total income of that specific legatee for the same tax year. This provision concerns income, not an automatic taxation of the inherited capital itself.
Section 312(7): Recovery of tax by executor
The provisions of Section 305 concerning a representative assessee's right to recover tax paid or payable apply, so far as possible, to an executor. The executor may accordingly have statutory rights to retain or recover relevant tax amounts from the estate under the conditions of that provision.
Relevant statutory terms and distinctions
Practical example: Rental income from an inherited property
Assume a person dies during a tax year leaving a rental property. An executor administers the property, and it earns rental income of Rs. 4,00,000 after death before the estate is fully distributed. Subject to applicable deductions and other provisions, the estate income is assessed in the executor's representative capacity under Section 312.
If Rs. 1,00,000 of that year's estate income is distributed to or applied for a specific legatee during that same tax year, Section 312(6) requires that amount to be excluded from the executor's computation and included in the legatee's total income. The remaining estate income is considered in the executor's separate estate assessment, subject to applicable tax rules.
Frequently asked questions
Does an executor pay income tax personally on estate income?
The executor is assessed in the statutory capacity specified by Section 312. Estate income is assessed separately from the executor's personal income under subsection (4).
What if two people are appointed executors?
Under Section 312(1), where there is more than one executor, estate income is chargeable in their hands as an association of persons.
When does the executor's estate assessment period end?
Section 312(5) covers the period from death until complete distribution of the estate to beneficiaries according to their respective interests.
Is every inheritance taxable as income?
No. Section 312 deals with income of the estate during administration; it should not be read as imposing income tax automatically on the value of every inherited asset. Other provisions may affect the tax treatment of particular receipts or subsequent income.
Can an executor recover income tax paid for the estate?
Section 312(7) applies Section 305, so far as possible, to the executor's tax paid or payable. The precise recovery or retention rights must be assessed under that provision.
Related law and official resources
Read Section 312 together with Section 302 (Legal representative), Section 303 (Representative assessee) and Section 305 (Right to recover tax paid).
Last reviewed: 11 November 2026. This article is general legal information, not advice on a particular estate.