FBR explains how fair market values for property, assets, services and benefits will be determined for income tax purposes in Tax Year 2027.
ISLAMABAD: The Federal Board of Revenue (FBR) has outlined the mechanism for determining the fair market value (FMV) of property, assets, services, benefits and perquisites for income tax purposes in Tax Year 2027.
The FBR has issued the updated Income Tax Ordinance, 2001, incorporating amendments up to June 30, 2026, and explained the provisions of Section 68, which establishes the framework for determining fair market value.
Definition of fair market value
Under Section 68, the fair market value of any property, rent, asset, service, benefit or perquisite at a particular time is the price that the item would ordinarily fetch if sold or supplied in the open market at that time.
The law requires fair market value to be determined without taking into account any restriction on the transfer of the property or asset. It also does not depend on whether the item is otherwise convertible into cash.
Where the ordinary price of an item, other than immovable property, cannot be readily ascertained, the Commissioner may determine its fair market value.
FBR empowered to determine property values
Section 68 also empowers the FBR to determine the fair market value of immovable property in specified areas.
The Board may, from time to time, issue a notification in the official Gazette specifying the fair market value of immovable property for an area or areas.
Where the FBR has not notified a fair market value for an area, the value of the immovable property will be deemed to be the value determined by the District Officer (Revenue), provincial authority or any other authority authorised to determine values for stamp duty purposes.
Minimum valuation for immovable property
The law further establishes a minimum valuation requirement for certain transactions and tax calculations involving immovable property.
For immovable property, the following values cannot be lower than the fair market value determined under Section 68(4) or Section 68(5):
• Component A of the formula prescribed under Section 37(2);
• “Consideration received” referred to in Division X of Part IV of the First Schedule;
• “Value of immovable property” referred to in Division XVIII of Part IV of the First Schedule; and
• Valuation undertaken for the purposes of Section 111.
The provision ensures that values used for these specified tax purposes do not fall below the applicable fair market value determined under the law.
FBR clarifies auction price rule
The FBR has also clarified the treatment of cases where the notified or otherwise determined fair market value differs from an auction price.
For the purposes specified under Section 68, where the fair market value determined under sub-section (4) or (5) differs from the auction price, the higher of the two values will be applicable.
The FBR has further clarified that fair market values determined under these provisions are intended solely for carrying out the purposes of the Income Tax Ordinance, 2001.
The mechanism under Section 68 therefore provides taxpayers and tax authorities with a statutory framework for determining property and other values relevant to income tax calculations for Tax Year 2027.