How to report inherited property in tax return a Complete guide

How to report inherited property in tax return A Complete guide. Accurately reporting assets in the wealth statement of the tax return is a very sensitive and complex step, as even a slight misreporting can lead to legal issues from the FBR. In the current tax season, many people inherit property from their father or other relatives, which must be disclosed in the return. Because it is important for saving taxes and tax planning.

Today we will discuss how to report a property on your tax return if you inherit it.

The main question is

Should it be shown at zero value?

Should it be shown at current market value?

Or should some other value be taken?

Table of Contents

How to report when acquisition cost is available?

What is the difference between these three options, what are their advantages and disadvantages, and what the law says about it, that is the topic of today?

General question of reporting inherited Estate.

The question is often raised that when a property is inherited, at what price should it be shown in the tax return?

For this, we have to look at two scenarios:

First scenario: The estate was inherited from parents and there is a purchase price.

For example, you have inherited estate or shares from your parents.

Parents bought this property 20 years ago, let’s say for Rs 5 lakh.

Now in 2025, this estate has been transferred to your name.

At what value do you have to report in the tax return?

If parents have the purchase registry or documents, then you have to show the same original purchase price.

Reporting at the current market price (for example, Rs 2 crore) is not allowed.

The reason is that the law says that the same amount goes forward on the hereditary transfer within the family as it was at the time of purchase.

Documents of the original value are not available

If you do not have the purchase registry and the price is not known, then the last option is to report it at zero amount.

Its major disadvantages are:

When you sell this property in the future, the formula will be:

Sale Price – Cost = Profit

If the cost is zero and the sale price is (for example, 2 crores), then the entire 2 crores will be considered your profit.

You will have to pay 15% capital gain on this, which is a huge amount.

Why can’t reporting be done on current market price?

Some people think that if they report the property at the current market value, they will save tax later when selling it. But this is not true.

Only the original purchase cost will be considered for inherited property.

You cannot “manage” in between and write a new value.

If you do so, it will be legally wrong and the FBR will not accept it.

Difference between Capital Gain and Withholding Tax (236C)

When you sell a property, you will have to pay 15% capital gain on “Sale Price – Cost = Gain” (if the transfer is made after July 1, 2024).

In addition, 236C withholding tax is deducted at the time of sale.

Remember:

236C tax is not a capital gain tax but only an adjustable withholding tax.

You can adjust it in the annual return.

Quick sale scenario (if parents are alive)

Sometimes it happens that parents want to transfer the property in the name of the children but the intention of the children is to sell it immediately to a third person

In this case, the advice is:

Do not transfer in the name of the children.

The parents should sell the property directly to third person.

Advantages:

Only one person (father or mother) will have to pay tax, not three children separately.
If the property was purchased old, then there will be no capital gain
The share that the children will get can be shown in their return as share of inheritance, along with a family tree or NADRA certificate.