Capital Gains Tax proposed on Sale of Inherited Property in Pakistan

ISLAMABAD – Inherited property largely passed from one generation to next without concerns over capital gains taxation. However, that could change under a new proposal discussed by the National Assembly’s Standing Committee on Finance. Federal Board of Revenue (FBR) proposed bringing gains from sale of inherited properties and plots into the tax net, potentially reshaping how inherited real estate is valued and taxed in Pakistan. A key proposal concerning taxation of inherited properties came under discussion during meeting of National Assembly’s Standing Committee on Finance, chaired by Syed Naveed Qamar, with officials of Federal Board of Revenue (FBR) in attendance. During the meeting, officials of the apex tax committee briefed members on proposal to impose Capital Gains Tax (CGT) on sale of inherited properties and plots. Under the proposed mechanism, the market value of a property on the date of the original owner’s death would be treated as its acquisition cost for tax purposes. Officials explained that inherited properties transferred through family settlement arrangements would receive legal protection. They further stated that the value of the property on the day of the deceased owner’s death would serve as the baseline cost, while any subsequent increase in value would be treated as a capital gain and become taxable upon sale. FBR officials cited an example in which a plot valued at Rs80 million at the time of a father’s death is later sold for Rs100 million. In such a case, Capital Gains Tax would be applicable on the Rs20 million increase in value. Standing Committee Chairman Syed Naveed Qamar suggested that the original cost of the property should instead be determined from the date on which ownership is formally transferred. The committee subsequently proposed that the transfer-of-ownership date be considered the benchmark for calculating the property’s original cost. The meeting further approved proposal to make el