Committee Approves CGT Framework for Inherited Properties

The National Assembly Standing Committee on Finance and Revenue has approved a key proposal to bring the sale of inherited properties and plots within the ambit of Capital Gains Tax (CGT). The recommendation was reviewed as part of a broader package of tax reforms introduced by the Federal Board of Revenue (FBR).

During the committee meeting, FBR officials outlined a valuation framework under which the market value of an inherited property at the time of the deceased owner's death would be treated as the acquisition cost for tax purposes.

Under the proposed mechanism, CGT would only apply to the increase in value occurring after inheritance. For example, if an inherited plot was valued at Rs8 million upon the original owner's death and was subsequently sold for Rs10 million, tax would be imposed solely on the Rs2 million capital gain.

Committee Chairman Syed Naveed Qamar recommended that the property's base value should instead be determined from the date on which ownership is officially transferred to the legal heir. Following deliberations, the committee proposed that the valuation of inherited assets should be linked to the ownership transfer date.

The committee was further informed that inherited assets transferred through family settlement arrangements would receive legal recognition and protection under the proposed provisions. In such cases, however, the valuation date would continue to be the date of the original owner's death to ensure consistency in determining the property's acquisition cost.

Tax authorities maintained that the proposed framework would eliminate uncertainties surrounding inherited assets and establish a transparent mechanism for calculating taxable gains upon disposal.

Separately, the committee also approved a proposal to make electronic filing of income tax returns mandatory. According to FBR officials, taxpayers will be required to submit returns through the IRIS portal, while companies will be obligated to furnish financial statements in machine-readable formats.

Officials noted that Pakistan's tax filing system has largely transitioned to digital processes since 2013, although manual submissions continue in certain areas, including Gujranwala.

In addition, the committee endorsed a proposal granting a 10% tax credit to encourage digital integration and technological adoption within the tax framework.