Assuming the FD is in India: interest attributable up to your parent’s date of death is generally reported as the parent’s income, with a legal representative handling the return and any liability in that capacity. Interest earned after death is reported according to who administers or owns the deposit or proceeds: an executor, administrator, or legal heir may be responsible depending on whether the estate has been distributed. A bank paying the nominee or surviving joint holder does not, by itself, determine who ultimately owns the money for tax purposes.
This is general information, not a determination of beneficial ownership or an individual tax bill. The date of death, will, estate administration, distribution, account mandate, and actual ownership can all matter.
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How the date of death changes who reports the interest
Use the date of death as the dividing line. The Income Tax Department’s guidance distinguishes income up to that date from income generated by estate property afterward. For interest attributable to the period through death, the legal representative handles the deceased parent’s return and liabilities in that representative capacity, under the framework in section 159. The heir does not become personally responsible for all the parent’s tax merely by inheriting; liability is subject to the rules governing the legal representative and the deceased’s estate. Income Tax Department: taxation of legal representatives and legal heirs.
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Who reports FD interest in common situations?
| Situation | Who generally reports the interest | What to establish |
|---|---|---|
| Interest attributable through the parent’s date of death | The deceased parent’s income, handled by the legal representative in that capacity. | Interest period and the parent’s tax records for the relevant year. |
| Interest earned after death while an executor administers the estate | The executor may be assessed on estate income under section 168 until the estate is distributed. | Whether there is a will and executor, and whether the FD or proceeds remain part of the estate. |
| Interest earned after death while an administrator handles the estate | The administrator’s role may affect assessment while estate administration is ongoing. | Who has been appointed and the status of the estate. |
| Interest after the FD or proceeds have been distributed to heirs | The heir who owns the inherited property generally reports income it earns after the date of death as their own income. | When distribution took place and who owns the deposit or proceeds. |
| A nominee or surviving joint holder receives payment from the bank | Receipt alone does not settle the ultimate tax owner; reporting depends on estate administration and beneficial ownership. | The bank mandate and claim settlement, separately from the heirs’ or owners’ rights to the funds. |
These are general branches, not a universal allocation formula. The official guidance does not conclusively resolve every ordinary FD case involving joint holders, unequal contributions, disputed beneficial ownership, or stale account details. Do not assume an equal split or automatically assign all interest to the first holder without checking the facts and applicable advice.
Does the nominee pay tax on the FD interest?
Not necessarily. Nomination and survivorship instructions help a bank process a claim or make payment, but payment to a nominee or surviving holder does not by itself establish who beneficially owns the deposit among heirs. RBI guidance on deceased-depositor claims concerns the bank’s settlement and discharge; it is not a standalone ruling on the ultimate tax ownership of funds among family members. RBI guidance on claims in deceased depositors’ accounts.
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Keep the bank’s payment process distinct from the tax question. Identify whether the FD remained an estate asset, whether an executor or administrator was managing it, and whether it was distributed or held for other heirs. If ownership is contested or the joint-account contributions are unclear, obtain advice from an Indian tax professional or estate lawyer rather than treating the named recipient as automatically responsible for all post-death interest.
What if TDS appears under your parent’s PAN?
TDS is tax withheld at source, not a final determination of who owes tax on the income. Section 194A provides the framework for withholding on specified interest payments, including time deposits, subject to its conditions, exceptions, and thresholds. The final tax is computed under the applicable return and tax rules, and withholding should be reconciled with the relevant taxpayer’s return. Rates and thresholds can vary by financial year and taxpayer category, so check the rules applicable to the year rather than relying on an old figure. Income Tax Act, including section 194A.
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One CBDT instruction is narrow: Notification No. 08/2017, dated 13 September 2017, addresses deposits under the Capital Gains Accounts Scheme, 1988. It provides for pre-death interest TDS to be reported against the depositor’s PAN and post-death interest TDS against the legal heir’s PAN under the described procedure. That instruction is not a universal PAN-reporting rule for ordinary bank FDs. If an ordinary FD’s TDS appears under the deceased parent’s PAN or an heir’s PAN, verify the bank’s reporting and reconcile the credit with the appropriate return rather than treating the PAN display alone as proof of tax ownership. CBDT Notification No. 08/2017.
How a legal representative handles the deceased parent’s return
The legal representative can register on the Income Tax Department e-filing portal as the legal heir of a deceased user and handle the deceased taxpayer’s return in that capacity. Follow the portal’s current registration steps and document requirements when filing, since requirements can change. Income Tax Department: register as a legal heir.
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Useful records to gather include:
- The death certificate and proof of legal-representative status.
- FD statements and interest certificates showing the periods and amounts involved.
- TDS details and relevant tax-account information for the parent and any heir receiving income.
- The will, appointment of an executor or administrator, and records showing when estate assets were distributed.
- Bank claim documents and account mandate details, kept distinct from evidence of beneficial ownership.
When the answer needs individualized advice
Get qualified Indian tax or legal advice if heirs dispute who contributed to or owns a joint FD, the will or estate administration is unclear, an executor or administrator is involved, or bank TDS records do not match the likely reporting party. The reviewed official guidance does not establish a single allocation rule for every such ordinary FD fact pattern.
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