Inherited Property after Finance Act 2026: Cost Basis and Transfer Taxes

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For an individual who inherits immovable property, the tax cost is no longer something to guess from an old purchase receipt. New section 76(8A) specifies fair market value under section 68(5) on transfer to the beneficiary as the cost in that individual's hands.

Document the inheritance and valuation date

Retain the succession and title documents, evidence of transfer to the beneficiary and the applicable valuation material. The statutory valuation reference matters: a private estimate or the deceased owner's original cost is not automatically the value required by the new subsection.

Family settlement following a death

The explanation added to section 79(1)(b) clarifies that transmission to a beneficiary on death includes a family settlement among family members consequent upon that death. It should not be used to describe every lifetime family transfer as an inheritance.

Later sales and purchases are separate events

The revised First Schedule sets section 236C collection at 2.75% of gross consideration received and section 236K collection at 1.25% of fair market value. These are the base provisions: applicable taxpayer-status rules and exceptions must also be checked. They do not establish the final capital-gains liability.

For a Rs. 10 million transaction, the arithmetic at those base rates is Rs. 275,000 on the sale consideration and Rs. 125,000 on the purchase fair market value, respectively. The two bases may differ in a real transaction, and the example assumes no rate modification or exemption.

Before signing

Prepare separate schedules for inherited cost, sale gain, withholding and provincial transfer charges. This avoids treating a withholding receipt as proof that every tax consequence has been settled.

Legislation checked

Finance Act 2026, PDF pages 34-58. Source-text review: 14 October 2026. The Act generally commences on 1 July 2026, subject to express exceptions. Any required implementing notification must also be checked before applying a concession.