Archive · 11 Oct 2026
Who Pays Tax on Fixed Deposit Interest After a Parent Dies?
When a parent dies, the money in their fixed deposit is generally not taxed just because it is inherited.
But the interest earned on that money can be taxed.
Interest earned before the parent died is generally treated as the parent’s income.
A legal representative may need to report it in the parent’s tax return.
Interest earned after the death is generally reported by the person who legally inherits or owns the deposit.
Sometimes the bank keeps the FD in the parent’s name while settling the claim.
In that case, heirs should keep documents and find out how the deposit and interest are legally divided.
This helps them report the income correctly.
Inherited fixed-deposit principal is generally not taxable in India, but interest earned on it may be.
Interest accrued up to the parent’s date of death is generally taxable as the parent’s income.
A legal representative reports the deceased parent’s income by filing the return when required.
Interest accruing after death is generally taxable to whoever is legally entitled to the deposit.
If the FD remains in the deceased parent’s name during settlement, heirs should document ownership and interest allocation and obtain the bank’s interest certificate.
- Who
- The deceased parent, their legal representative, and the heirs legally entitled to the fixed deposit.
- What
- Tax responsibility for fixed-deposit interest earned before and after a parent’s death.
- When
- Interest accrued up to the date of death is generally the parent’s income; interest accruing afterward is assessed based on legal entitlement.
- Where
- India.
- Why
- Tax liability depends on when the interest accrues and who legally owns or is entitled to the deposit.
Interest earned before death
Interest earned after death
Who reports the interest
Interest earned before death
Interest accrued up to the parent’s death is generally reported as the parent’s income by a legal representative.
Interest earned after death
Interest accruing after death is generally reported by the person legally entitled to the FD through inheritance.
Ownership while a claim is pending
Interest earned before death
The FD may continue in the deceased parent’s name while the bank processes the claim; heirs should retain records and establish allocation.
Interest earned after death
The tax treatment depends on who is legally entitled to the deposit and its subsequent interest.
- Inherited principal
- Generally not taxable in India.
- Interest before death
- Generally taxable as the deceased parent’s income.
- Return for pre-death interest
- A legal representative reports the parent’s income through the tax return when required.
- Interest after death
- Generally taxable to the person legally entitled to the deposit.
- FD awaiting settlement
- Heirs should keep the bank’s interest certificate, death certificate, and succession documents, and clarify legal allocation.
- Expert quoted
- Nishant Shanker, Tax Controversy and Dispute Resolution, Navraj Global Advisors.