Finance Bill 2026 clarifies valuation rules for inherited property, aligning cost basis with fair market value at the time of inheritance.
ISLAMABAD: The Finance Bill, 2026 has introduced a clarification regarding the determination of market value of inherited immovable property under the Income Tax Ordinance, 2001.
A new Section 8A has been inserted into the Income Tax Ordinance, 2001, specifying the basis for calculating the cost of inherited property in the hands of the beneficiary.
According to the proposed provision:
“Where an immovable property is acquired by an individual through inheritance, the cost of such property in the hands of that individual shall be the fair market value of the property as provided under sub-section (5) of section 68 of this Ordinance on the day of the death of the original owner.”
Under the new rule, the cost of inherited immovable property will be determined based on its fair market value on the date of the original owner’s death, rather than the historical purchase price or any previous valuation.
Tax experts say the amendment is aimed at providing clarity in capital gains taxation where inherited properties are later sold by legal heirs. By establishing a clear cost basis at the time of inheritance, the provision is expected to reduce disputes between taxpayers and tax authorities regarding valuation differences.
The clarification is also likely to bring uniformity in the treatment of inherited assets, particularly in cases involving long-held properties where original purchase records may not be readily available.
The Finance Bill, 2026 states that the fair market value will be determined in accordance with Section 68(5) of the Income Tax Ordinance, 2001, which governs valuation principles for assets.
If enacted, the amendment will apply to all inherited immovable properties acquired after the commencement of the Finance Bill, 2026, ensuring a standardised approach to valuation for tax purposes across the country.
