Is there inheritance tax in Pakistan?

No. There is no estate duty or inheritance tax, and section 79(1)(b) means transmission of an asset to an executor or beneficiary on death gives rise to no gain or loss. What the heir does inherit is the deceased's cost basis, which affects the tax on a later sale.

Is a gift taxable in Pakistan?

A gift of an asset to a relative as defined in section 85(5) gives rise to no gain or loss under section 79(1)(c). A gift to someone outside that definition is treated as an ordinary disposal. The gift limb was narrowed to relatives by the Finance Act 2018.

Who counts as a relative for a tax-free gift?

Under section 85(5): an ancestor, a descendant of any of your grandparents, or an adopted child, of you or of your spouse, and a spouse of any of those. Descendants of a grandparent reaches siblings, uncles, aunts and first cousins.

If I am gifted a property, what is my cost for capital gains?

The giver's cost, not the market value at the time of the gift. Section 79(3)(b) treats you as acquiring the asset for a cost equal to the cost it had for the person disposing of it, so the accrued gain carries over to you.

Can I gift a property to my child before selling it to save tax?

It does not save the tax, it moves it. No gain arises on the gift itself, but the child takes your original cost under section 79(3)(b), so the whole accrued gain is still there and falls on them when they sell.

Can heirs redistribute inherited property between themselves?

Yes, and since the Finance Act 2026 the position is explicit. An Explanation to section 79(1)(b) confirms that transmission of immovable property to a beneficiary on death includes transmission by family settlement among family members consequent upon the death.

Does a gift avoid advance tax on a property transfer?

Not necessarily. Section 79 governs capital gains only. Advance tax under sections 236C and 236K operates on the transfer itself, and whether it is collected depends on the transaction and the documentation rather than on section 79.

Do I need a gift deed?

The relationship is what takes a gift outside the charge, so it should be evidenced rather than assumed, and an unexplained asset can be caught by section 111 whatever the parties call the transaction. A gift deed and a clear trail are what make the position defensible later.

Property tax

Tax on Gifts and Inherited Property in Pakistan

Section 79 provides that no gain or loss arises on transmission of an asset on death, or on a gift to a relative. But the recipient takes the asset at the giver's original cost, not its current value, so the accrued gain is preserved rather than erased and falls on the recipient when they sell. Pakistan has no separate inheritance or estate tax.

We do this for clients:Tax Advisory and FBR Representation in Pakistan

Where these figures come from

Statutory basis: Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
Last checked against the statute: 4 September 2026 by BarrioVibe, which files income tax returns through FBR IRIS.

These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.

When no gain or loss arises at all

Section 79(1). Anything not on this list is an ordinary disposal, valued as if it had been sold.

Between spouses under an agreement to live apart
Transmission of the asset to an executor or beneficiary on the death of a person
A gift of the asset to a relative, as defined in section 85(5)
Compulsory acquisition under any law, where the consideration is reinvested in an asset of a like kind within one year
By a company to its shareholders on liquidation
By an association of persons to its members on dissolution, where assets are distributed in accordance with their interests in the capital

There is no inheritance tax, and that is a separate point

Pakistan has no estate duty or inheritance tax as such. Section 79(1)(b) means the transmission itself is not a taxable event, so an heir does not face a charge on receiving property.

What an heir does inherit, along with the property, is the deceased's cost basis under section 79(3)(b) and the eventual capital gains position that comes with it. So "no inheritance tax" is true and is not the same as "no tax", and the difference shows up years later at the point of sale.

What the gain would be on a later sale

Because the cost carries over, the figure to enter is what the original owner paid, not what the property was worth when it came to you. That single input is what most people get wrong on an inherited or gifted property.

Property Capital Gains

Documenting a gift properly matters more than the tax

Because a gift to a relative is outside the charge and a gift to anyone else is not, the relationship is doing the work, and it should be evidenced rather than assumed. The same applies to the money: an unexplained asset can be caught by section 111 regardless of what the parties call the transaction.

A gift deed, the relationship, and a clear trail for any consideration are what make the position defensible later. This is one of the places where an arrangement that is perfectly lawful becomes expensive purely because nobody wrote it down at the time.

Questions

The questionspeople ask

Is there inheritance tax in Pakistan?
No. There is no estate duty or inheritance tax, and section 79(1)(b) means transmission of an asset to an executor or beneficiary on death gives rise to no gain or loss. What the heir does inherit is the deceased's cost basis, which affects the tax on a later sale.
Is a gift taxable in Pakistan?
A gift of an asset to a relative as defined in section 85(5) gives rise to no gain or loss under section 79(1)(c). A gift to someone outside that definition is treated as an ordinary disposal. The gift limb was narrowed to relatives by the Finance Act 2018.
Who counts as a relative for a tax-free gift?
Under section 85(5): an ancestor, a descendant of any of your grandparents, or an adopted child, of you or of your spouse, and a spouse of any of those. Descendants of a grandparent reaches siblings, uncles, aunts and first cousins.
If I am gifted a property, what is my cost for capital gains?
The giver's cost, not the market value at the time of the gift. Section 79(3)(b) treats you as acquiring the asset for a cost equal to the cost it had for the person disposing of it, so the accrued gain carries over to you.
Can I gift a property to my child before selling it to save tax?
It does not save the tax, it moves it. No gain arises on the gift itself, but the child takes your original cost under section 79(3)(b), so the whole accrued gain is still there and falls on them when they sell.
Can heirs redistribute inherited property between themselves?
Yes, and since the Finance Act 2026 the position is explicit. An Explanation to section 79(1)(b) confirms that transmission of immovable property to a beneficiary on death includes transmission by family settlement among family members consequent upon the death.
Does a gift avoid advance tax on a property transfer?
Not necessarily. Section 79 governs capital gains only. Advance tax under sections 236C and 236K operates on the transfer itself, and whether it is collected depends on the transaction and the documentation rather than on section 79.
Do I need a gift deed?
The relationship is what takes a gift outside the charge, so it should be evidenced rather than assumed, and an unexplained asset can be caught by section 111 whatever the parties call the transaction. A gift deed and a clear trail are what make the position defensible later.

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