FBR explains how tax liabilities, estate income and pending proceedings are handled after the death of an individual under Section 87.
ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the procedure for determining the income tax liability of a deceased individual and their estate during Tax Year 2027.
The FBR has issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, and explained the relevant provisions under Section 87, which deals with the tax obligations and proceedings involving deceased individuals.
Tax Liability of a Deceased Individual
Under Section 87, the legal representative of a deceased individual is liable for any tax that the individual would have been required to pay had they not died.
The legal representative is also responsible for tax payable in respect of income earned by the deceased person’s estate.
However, the liability of the legal representative is limited to the extent that the deceased person’s estate is capable of meeting the tax liability.
The law further provides that any tax liability under the Income Tax Ordinance, 2001, constitutes the first charge on the deceased person’s estate.
This means that outstanding income tax liabilities have a priority claim against the estate before the remaining assets are distributed, subject to the applicable legal provisions.
Tax Proceedings Continue After Death
Section 87 also establishes how income tax proceedings are handled following the death of an individual.
Any proceedings initiated against the deceased under the Income Tax Ordinance before their death are treated as proceedings against the legal representative.
Such proceedings may continue against the legal representative from the stage they had reached on the date of the individual’s death.
Similarly, proceedings that could have been initiated against the deceased had they survived may be initiated against the legal representative.
The provision therefore ensures that the death of a taxpayer does not automatically bring existing or potential tax proceedings to an end.
Who Is a Legal Representative?
For the purposes of the Income Tax Ordinance, a legal representative means a person who legally represents the estate of a deceased individual.
The definition also includes a person who intermeddles with the estate of the deceased.
Where a person brings or faces legal proceedings in a representative capacity, the definition can also cover the person upon whom the estate devolves following the death of the party who initiated or was subject to the proceedings.
Tax Obligations Remain After Death
The provisions under Section 87 establish that the death of an individual does not extinguish outstanding income tax liabilities.
Instead, responsibility for the deceased person’s tax obligations, including applicable proceedings and tax relating to estate income, passes to the legal representative, subject to the value and capacity of the deceased’s estate to meet those liabilities.
The rules provide a framework for dealing with the tax affairs of deceased individuals and their estates during Tax Year 2027, ensuring that outstanding tax obligations continue to be addressed after death.