NA body backs capital gains tax on sale of inherited properties, plots

The National Assembly Standing Committee on Finance and Revenue has endorsed a proposal to impose capital gains tax (CGT) on the sale of inherited properties and plots. The committee considered amendments relating to inherited properties and family settlements as part of tax measures proposed by the Federal Board of Revenue.

Federal Board of Revenue officials proposed a valuation mechanism under which the cost of an inherited property would be treated as its market value on the date of the original owner’s death.

They said this value would be used as the acquisition cost for calculating capital gains tax when the property is later sold.

Explaining the mechanism, officials said that if a plot was worth Rs8 million at the time of the owner’s death and was later sold for Rs10 million, capital gains tax would be charged only on the Rs2 million increase in value.

Committee Chairman Syed Naveed Qamar advised that the original value of the property should be calculated from the date ownership is formally transferred.

The committee later suggested that the real value of inherited property should be determined from the date of transfer of ownership.

The committee was also informed that inherited properties transferred through family settlement arrangements would receive legal protection under the proposed framework.

For such assets, the valuation date would remain the date of the original owner’s death to provide certainty in determining the original cost of the property.

Tax authorities said the measure would remove ambiguity around inherited assets and introduce a clearer system for taxing gains arising from their sale.

The standing committee also approved a proposal requiring income tax returns to be filed only through electronic means.

Federal Board of Revenue officials said taxpayers would be required to file returns through the IRIS system, while companies would have to submit financial statements in machine-readable formats.

Officials said the Federal Board of Revenue had largely shifted to digital filing since 2013, although manual returns were still being submitted from some cities, including Gujranwala.

The committee also endorsed a proposal for a 10% tax credit for digital integration.