FBR clarifies that inherited immovable property will be assigned its fair market value as the beneficiary’s cost under Finance Act 2026 amendments.
ISLAMABAD: The Federal Board of Revenue (FBR) has clarified that immovable property acquired through inheritance will be treated at its fair market value as the cost of the property in the hands of the beneficiary under amendments introduced through the Finance Act, 2026.
The FBR issued Income Tax Circular No. 2 of 2026-27, explaining major amendments to the Income Tax Ordinance, 2001 introduced through the Finance Act, 2026.
Fair market value applies to inherited property
Under the newly inserted sub-section (8A) of Section 76, where an individual acquires immovable property through inheritance, the cost of the property in the hands of that individual will be its fair market value.
The fair market value will be determined under sub-section (5) of Section 68 at the time the property is transferred to the beneficiary.
The amendment provides greater clarity on the valuation of inherited property for income tax purposes, particularly where the beneficiary subsequently disposes of the asset.
By establishing the fair market value as the beneficiary’s cost, the provision sets out a clearer basis for determining the tax treatment of any subsequent disposal of the inherited property.
FBR clarifies transmission after death
The FBR has also introduced an explanation in Section 79 to clarify the scope of property transmission following the death of an individual.
Under the explanation, transmission of immovable property to a beneficiary following the death of a person will also include the transmission of assets arising from a family settlement among family members following the person’s death.
The clarification effectively brings qualifying family settlements made as a consequence of death within the relevant provisions governing the transmission of assets.
Finance Act 2026 expands property tax rules
The amendments form part of wider changes to the Income Tax Ordinance, 2001 introduced through the Finance Act, 2026 and explained by the FBR in its latest income tax circular.
The revised provisions provide greater certainty over how inherited immovable property and qualifying family settlements are treated for income tax purposes, particularly when inherited assets are later transferred or disposed of.