The FBR has outlined when assets are considered disposed of or acquired, including transfers, inheritance and changes between personal and business use.
ISLAMABAD: The Federal Board of Revenue (FBR) has explained the rules governing the disposal and acquisition of assets under Section 75 of the Income Tax Ordinance, 2001, updated up to June 30, 2026.
The provision establishes when a person is considered to have disposed of or acquired an asset for income tax purposes. It covers a range of circumstances, including sales, transfers, inheritance, changes in use and the loss or destruction of assets.
When an asset is considered disposed of
Under Section 75(1), a person holding an asset is treated as having disposed of it when they part with ownership of the asset.
This includes assets that are:
• sold, exchanged, transferred or distributed;
• cancelled, redeemed or relinquished;
• destroyed or lost;
• expired or surrendered.
The provision also treats the transmission of an asset by succession or under a will as a disposal by the deceased at the time the asset is transmitted.
These provisions establish the point at which an asset is regarded as having left a person’s ownership for income tax purposes.
Business assets used for personal purposes
Section 75 also deals with situations where the use of an asset changes from business to personal purposes.
Where a business asset is applied to personal use, it is treated as having been disposed of by its owner at the time it is converted to personal use.
Similarly, where a business asset is discarded or ceases to be used in a business, it is treated as having been disposed of.
The law also clarifies that disposal can apply to part of an asset, meaning the entire asset does not necessarily have to be disposed of for the provision to apply.
When an asset is considered acquired
Under Section 75(5), a person is treated as having acquired an asset when they begin to own it.
The provision also covers situations where a person is granted any right in the asset, establishing the relevant point of acquisition for tax purposes.
Section 75 further addresses personal assets that are subsequently brought into business use.
Where a personal asset is applied to business use, it is treated as an acquisition by the owner at the time it is applied to the business.
Definitions under Section 75
The provision defines a “business asset” as an asset held wholly or partly for use in a business. The definition includes stock-in-trade and depreciable assets.
A “personal asset” is defined as an asset held wholly for personal use.
The distinction between business and personal assets is relevant when determining whether a change in use constitutes a disposal or acquisition under the law.
Tax implications of asset transactions
Overall, Section 75 of the Income Tax Ordinance, 2001 establishes the points at which assets are considered to enter or leave a person’s ownership or change from personal to business use.
The rules are therefore relevant when determining the tax treatment of transactions and other events involving assets, including sales, transfers, inheritance and changes in the use of property or other assets.
The FBR’s explanation forms part of the updated provisions applicable for Tax Year 2027 and provides guidance on the circumstances in which an asset is treated as disposed of or acquired for income tax purposes.