As Pakistan enters tax year 2026 (July 1, 2025 to June 30, 2026), taxpayers and families handling estates are asking a key question: How does the tax law treat individuals who pass away during the tax year?
Section 87 of the Income Tax Ordinance, 2001 provides a detailed roadmap — and its rules are crucial for heirs, legal representatives, and estate managers.
Let’s break it down in an interactive, easy-to-understand way:
🔍 Who Pays the Tax After a Person Passes Away?
Under Section 87, the legal representative of a deceased individual becomes responsible for handling the tax obligations.
A legal representative must pay:
• All taxes the deceased would have owed if they were still alive.
• Any tax related to income generated from the deceased’s estate after their death.
This ensures that ongoing income (for example, rent, business revenue, or investment returns) continues to be taxed properly.
💰 How Much Is the Legal Representative Liable For?
Here’s the important part:
✔ Liability is limited
The legal representative’s responsibility only extends as far as the estate can pay.
They do not have to pay taxes personally out of their own assets.
✔ Tax is the first charge
Section 87(2A) states that tax obligations take first priority against the estate before other expenses or distributions.
🧾 What Happens to Pending Tax Proceedings?
If the deceased had ongoing tax matters at the time of death, the law ensures continuity:
🔹 Proceedings in motion continue
Any tax proceedings already started before death automatically continue against the legal representative.
🔹 New proceedings can be initiated
If the person had survived and could have been issued notices or assessments, those actions may still be taken — now directed at the legal representative.
This prevents disputes and ensures tax compliance isn’t interrupted by death.
👥 Who Counts as a Legal Representative?
Section 87 gives a broad definition to avoid confusion.
A legal representative includes:
• Someone who legally represents a deceased person’s estate.
• A person who intermeddles with the estate (for example, someone who takes control of assets).
• Anyone on whom the estate devolves upon death, including persons involved in lawsuits on behalf of the deceased.
This ensures tax responsibility is clearly assigned.
🏁 Why Section 87 Matters for Tax Year 2026
With tax year 2026 underway, understanding these rules helps families:
• Avoid penalties or missed filings
• Manage estate income transparently
• Ensure the estate is settled lawfully
• Protect legal representatives from unnecessary personal liability
Section 87 ensures the tax process continues smoothly, even when a taxpayer passes away.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For guidance on individual cases, consult a qualified tax professional or legal advisor.