Income tax law / Estate administration

Section 168 of the Income-tax Act, 1961: Taxation of Executors and Estate Income

Section 168 governs how income earned by a deceased person's estate after death is assessed while the estate is administered. It treats the executor as a separate taxable capacity and addresses the treatment of income passed to specific legatees. The corresponding provision in the Income-tax Act, 2025 is Section 312.

What is an executor under income-tax law?

An executor is a person responsible for administering a deceased person's estate, ordinarily under a will. The Explanation to Section 168 expressly extends the term to an administrator or other person administering the estate. An estate comprises the assets and interests left by the deceased; estate income means income arising from those assets during administration, such as rent or interest.

A specific legatee is a beneficiary entitled to a specified legacy under the testamentary arrangements. Whether an amount has actually been distributed or applied for that legatee's benefit matters for the allocation rule in Section 168(4).

Section 168: provisions explained subsection by subsection

Section 168(1): who is assessed?

The estate's income is taxable in the executor's hands. With one executor, assessment is made as if the executor were an individual. With more than one executor, assessment is made as if the executors were an association of persons (AOP). This classification concerns assessment of estate income, not the executors' personal earnings.

For this purpose, the executor is deemed resident or non-resident according to the deceased's residential status during the previous year in which death occurred.

Section 168(2): separate assessment

The executor's assessment for the estate must be made separately from any assessment of the same individual in respect of personal income. Estate records, receipts and expenditure should therefore be maintained distinctly.

Section 168(3): assessment period

Separate assessments apply to the income of each completed previous year, or relevant part of a year, within the period from death until complete distribution of the estate to beneficiaries according to their interests.

Section 168(4): income distributed to a specific legatee

Income of the estate for a previous year that is distributed to, or applied for the benefit of, a specific legatee in that year is excluded when computing the executor's taxable estate income. That excluded income is instead included in the specific legatee's total income for the relevant year. This rule concerns income, not an automatic tax on every transfer of inherited capital.

Explanation: extended meaning of executor

For Section 168, an executor includes an administrator or any other person administering the estate of a deceased person.

Corresponding provision: Section 312 of the Income-tax Act, 2025

Section 312 restates the taxation of executors for the new Act's tax years. Its subsections cover assessment as an individual or AOP, deemed residence based on the deceased's status in the year of death, the meaning of executor, separate assessment, the period ending on complete distribution, and treatment of income paid to a specific legatee.

Section 312(7) also expressly applies Section 305, so far as applicable, to tax paid or payable by the executor, corresponding to representative-assessee recovery principles. Consult the official full text of the Income-tax Act, 2025 for exact wording and applicability.

Illustrative calculation: executor and beneficiary

Assume an estate earns Rs. 6,00,000 of taxable rental and interest income during a year after the owner's death. During that year, Rs. 2,00,000 of this income is distributed to a specific legatee, and the remaining Rs. 4,00,000 stays in the estate.

This is a simplified allocation example, not a tax-liability estimate. Deductions, exemptions, character of income, tax rates and the facts of the distribution must be considered separately.

Practical compliance for executors

• Identify the date of death and distinguish the deceased's income up to death from income earned by the estate afterward. Official guidance on special-case liability discusses this distinction.
• Preserve the will, probate or administration order (where applicable), death certificate, asset statements and supporting financial records.
• Track the estate's receipts, allowable expenses and payments to each beneficiary, with dates and documentary evidence.
• Review registration and authorization on the Income Tax Department's representative-assessee service for an estate of a deceased person.
• Consider the related Section 169: executor's right to recover tax paid and the rules applicable to legal representatives under Section 159.

Frequently asked questions

Is an executor taxed on estate income together with personal income?

No. Section 168(2) requires a separate assessment of the executor in the capacity of executor, distinct from assessment of personal income.

What if two people are joint executors?

Under Section 168(1), where there is more than one executor, the estate income is assessed as if the executors were an association of persons.

When does assessment of the executor's estate income end?

The relevant period runs from the date of death to complete distribution of the estate to beneficiaries, with separate assessments for each relevant year or part-year.

Which provision applies under the Income-tax Act, 2025?

Section 312 is the corresponding provision for executor taxation under the Income-tax Act, 2025.

Official legal sources

• Income Tax Department: Section 168, Income-tax Act, 1961
• Income Tax Department: Income-tax Act, 2025 (Section 312)
• Income Tax Department: Liability in Special Cases
• Income Tax Department: Register as Legal Heir

Updated 27 October 2026. General legal information; the treatment of a particular estate depends on its documents, applicable tax year and relevant statutory provisions.