Income tax implications of inheriting fixed deposits (FD) after father’s death

My father had some fixed deposits in the bank and he passed away in July 2024. He did not write any will. I am the candidate for all the Fixed deposits He has. Since my father had no tax liability, he used to file Form 15H, so no TDS has been deducted in the past. I want to know how the interest portion would be taxed. It is a 10-year fixed deposit with cumulative interest option. If I continue the deposit in my father’s name, which I would like to, how would the interest portion be taxed? deposit It is in my father’s sole name and being a sole nominee, he would receive the income on maturity. What will be the tax liability at the time of receiving the income on maturity? How can I ensure that TDS is not deducted or can I claim a refund of TDS as my father has passed away and there is no point in deducting tax in his name? Can I show the interest income in my HUF account?

Since you have a HUF, it stands to reason that you are a Hindu as per the expanded definition of a Hindu under the Hindu Succession Act, 1956. Since your father did not draft any will, all his property immediately went to his legal heirs as per the provisions of the Hindu Succession Act. Therefore, all the property, including the fixed deposits in question, is inherited by his legal heirs.

Fixed Deposit Nominee Alert: Immediate steps for distribution of tax and legal heirs

Although the bank may pay the fixed deposit amount to you as a nominee, you do not become the owner of the money or hold it in trust for all the legal heirs entitled to their share of the money.

Since your father died intestate i.e. without leaving a will, the entire property has gone to the legal heirs and the proportionate interest immediately after your father’s death. Therefore, the interest income becomes taxable in their respective hands. Inform the bank about your father’s death so that you can claim the money from the fixed deposit as a testator. You cannot continue the fixed deposit in your name after his death. Since you will not be able to file Form 15H in respect of the fixed deposit held in your father’s name for the current year, the bank will deduct tax on the interest credited on it and claiming refund of the same poses another problem, so it is in your best interest to inform the bank immediately about your father’s death and get the money distributed among the legal heirs.

Any asset received as inheritance is not considered income of the recipient and should not be disclosed in the ITR. You cannot take the money from your HUF. If your father had signed a will bequeathing the fixed deposit amount fully or partially to his HUF, the money could have been taken in your HUF.

I assume that the interest accumulated on the fixed deposit has been offered for payment of tax year after year. If no provision had been made for payment of tax in the past on accrual basis, the interest accumulated till the death of your father would be taxed in your hands and the interest for the period after his death would be taxed in the hands of the respective legal heirs.

Read all our personal finance stories here

Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant, his username X.

Disclaimer: The opinions and recommendations expressed above are those of individual analysts and not those of Mint. We recommend that investors consult with certified experts before making any investment decisions.