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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →In India, the answer depends on when the fixed-deposit (FD) interest arose and how the estate is being administered. Interest attributable up to the account holder’s date of death is reported as the deceased person’s income. The legal representative files and handles that return. Interest arising after death is generally reported either by the legal heirs, where the person died intestate, or by the executor or administrator while the estate is awaiting distribution. A nominee or surviving account holder may receive money from the bank, but that fact alone does not decide who bears the income-tax liability.
Start with the income period, not the date the bank paid
FD interest can be credited, paid on maturity, or accumulated internally before the bank releases the deposit. Those banking events do not automatically determine the tax period. The relevant question is how much interest accrued or is attributable to the period before death and how much arose afterward.
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For a deceased sole account holder, separate the records into:
- Income up to the date of death: treated as the deceased’s income.
- Income after death: treated as estate income and allocated according to whether heirs or an executor/administrator is responsible for the estate.
The Income Tax Department describes a time-based apportionment between the period ending on the death date and the period beginning after that date. If a particular item does not accrue day by day, another reasonable basis may be needed. An FD that compounds or pays interest at set intervals may therefore require a calculation based on the bank’s accrual records rather than simply using the date printed on a credit entry.
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Who reports each part of the FD interest?
| Interest period or estate status | Who reports it | How it is handled |
|---|---|---|
| Interest attributable up to the date of death | Legal representative for the deceased | Included in the deceased person’s return, filed on the deceased’s behalf |
| Post-death income where the person died intestate | Legal heirs | Estate income is disclosed in the heirs’ own returns according to their entitlement |
| Post-death income while an executor or administrator is administering the estate | Executor or administrator | Reported in that representative capacity under the estate-tax rules until distribution |
| Money paid by a bank to a nominee or surviving holder | Not determined by the payment recipient alone | Bank-payment procedures and income-tax allocation are separate questions |
This framework comes from the Income Tax Department’s guidance on a deceased person’s income and estate income, together with the legal-representative rules in section 159 of the Income-tax Act, 1961. The exact allocation can require case-specific review for joint deposits, wills, survivorship instructions, disputed estates, or unusual interest calculations.
Interest earned up to the account holder’s death
The deceased remains the taxpayer for the pre-death period
Income attributable through the date of death belongs in the deceased person’s tax computation. The person who files is not the deceased, of course, but the legal representative acting for the deceased. The return covers the deceased’s income for the relevant period and is filed in the representative-assessee process.
Section 159 states: “Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.” This creates a statutory mechanism for collecting and reporting the deceased’s liability. It should not be simplified into a claim that an heir automatically has unlimited personal responsibility for every tax debt of the deceased.
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Establishing the amount before death
Ask the bank for an interest certificate or account statement that identifies accruals up to the death date, if the bank can provide one. Keep the FD advice, renewal or maturity details, accrued-interest working, death certificate, and correspondence with the bank. There is no single universal certificate format prescribed in the guidance, so preserve the underlying statements and the method used to split the interest.
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If the bank credits the entire year’s interest after the death, do not automatically place the whole credit in the deceased’s return or the heir’s return. Reconcile the credit with the accrual period and document the division.
Interest arising after death
When the person died intestate
Where there is no will governing the estate, the Income Tax Department’s summary says income from the estate is taxed in the hands of the legal heirs and disclosed in their own returns. The allocation should follow the heirs’ legal entitlement and the period for which the income arose. Receiving the money through one family member’s bank account does not, by itself, rewrite the beneficial entitlement.
When an executor or administrator is in charge
If an executor has been appointed, post-death estate income is taxable in the executor’s hands under section 168 until the estate is distributed. The same estate-level approach applies where an administrator is administering the property. The executor or administrator reports in that representative capacity; this is distinct from treating the income as the representative’s personal investment income.
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The department describes apportioning estate income between the period ending on the death date and the period beginning after it on a time basis. That is a practical starting point for interest that accrues evenly. For an amount that does not accrue day by day, use another reasonable basis supported by the deposit terms and bank records. State the method in the working papers and retain evidence for it.
Does a nominee pay the tax?
A nominee is usually the person authorized to receive or deal with the deposit proceeds after the account holder’s death. A surviving joint holder may also be able to operate or close the account under the bank’s mandate. Neither role, by itself, answers the income-tax question.
The tax analysis follows the income period and the estate’s legal administration. A nominee could receive a maturity amount that includes interest attributable partly to the deceased and partly to the post-death period. The pre-death portion remains part of the deceased’s computation, while the post-death portion follows the heir or executor framework.
Reserve a separate question for the bank’s payment procedure. RBI guidance says that the criteria for paying a matured term deposit after death are left to each bank’s transparent, board-approved policy. That guidance governs how the bank processes payment; it does not determine the income-tax allocation. Obtain the bank’s written policy or case correspondence when the payment route is unclear.
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How the legal representative files for the deceased
The Income Tax Department’s e-filing process allows a legal heir to register as a representative assessee and file the deceased person’s return. The official manual identifies the deceased person’s PAN, death certificate, and proof of legal-heir status among the registration documents.
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- Identify the correct representative: establish who is legally entitled to act for the deceased and whether an executor or administrator has been appointed.
- Collect the identity and estate documents: keep the deceased’s PAN, death certificate, and legal-heir or executor proof ready, along with the FD records.
- Register through the e-filing legal-heir process: use the portal’s current “legal heir” or representative-assessee workflow. Labels and screens can change, so follow the instructions displayed at the time of registration.
- Compute the deceased’s income only through the death date: include the properly apportioned FD interest and other income belonging to that period.
- File and retain the submission record: save the acknowledgement, computation, bank certificates, and documents supporting the legal-heir registration.
The portal’s exact sequence and document-validation requirements can change. Check the current Income Tax Department manual and on-screen instructions when you submit rather than relying on an old screenshot or checklist.
A practical allocation workflow
1. Freeze the relevant dates
Record the date of death, the FD opening and renewal dates, interest-payment or compounding dates, maturity date, and the date on which the bank actually released funds. These dates help distinguish accrual from payment.
2. Obtain an accrual breakdown
Request the bank’s interest certificate, ledger, or statement showing how it calculated interest. If the bank supplies only a total maturity amount, ask how much interest had accrued at the death date and how the balance was calculated afterward.
3. Identify the estate route
- Check whether a valid will appoints an executor.
- Confirm whether a court or competent authority has appointed an administrator.
- If neither exists and the person died intestate, identify the legal heirs and their entitlements.
- For a joint FD, read the mandate and survivorship terms and obtain advice on the ownership and tax allocation.
4. Apply a reasonable allocation method
Use day-based apportionment where the interest accrues evenly. If the deposit’s terms produce interest at a particular event rather than daily, use a defensible alternative based on the contract and bank records. Do not use the nominee’s receipt date as a substitute for an accrual analysis.
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5. Match each portion to the correct return
Put the pre-death portion into the deceased’s return through the legal representative. Put post-death income into the legal heirs’ returns where the estate is intestate, or into the executor’s or administrator’s estate reporting while distribution is pending.
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Joint FDs
Joint ownership, “either or survivor” instructions, and the source of the deposited funds can produce different legal and tax questions. The available official guidance does not resolve every joint-deposit combination. Review the account-opening form, contribution evidence, mandate, and survivorship clause instead of assuming that the surviving name on the account owns all future interest for tax purposes.
A will, disputed inheritance, or delayed distribution
A will may change who is entitled to post-death income and may place the estate under an executor’s control. If the will is contested or distribution is delayed, keep post-death interest in the estate’s records and obtain professional advice on whether the executor or another representative must report it.
Interest credited long after death
A late credit is a bookkeeping event, not proof that all the income arose after death. Ask the bank for the accrual period and preserve the calculation used to divide the amount.
Common mistakes to avoid
- “The nominee pays everything”: nomination controls payment mechanics, not automatically the tax character of each period’s interest.
- “The heir files the deceased’s income in the heir’s own return”: pre-death income belongs in the deceased’s return, filed by the legal representative.
- “The maturity date controls all tax”: interest may have accrued before that date.
- “RBI’s payout rule decides the tax liability”: the bank’s board-approved payment policy and the Income-tax Act address different issues.
- “An heir is personally liable without limit”: section 159 sets out liability in the manner and to the extent applicable to the deceased’s liability; obtain advice before treating personal assets as automatically exposed.
- “One calculation fits every FD”: joint ownership, estate administration, and non-daily accrual can change the analysis.
When to get professional help
Seek case-specific tax advice if the deposit is joint, the will is disputed, an executor or administrator is involved, the bank cannot provide an accrual split, or heirs disagree about entitlement. Bring the FD advice, statements, death certificate, legal-heir or probate documents, nomination and survivorship instructions, and the bank’s payment correspondence. A professional can then document the allocation rather than relying on the person who happened to receive the money.
Bottom line
For an Indian FD, tax follows the period in which the interest arose and the legal structure of the estate. The legal representative reports the deceased’s interest up to the date of death. After death, legal heirs report estate income when the person died intestate, while an executor or administrator reports it until distribution where that estate structure applies. A nominee or surviving holder may collect the deposit, but collection alone does not make that person the taxpayer for all of the FD interest.
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