I inherited property in Pakistan while living abroad. Is there tax on inheriting it or on selling it later?

Pakistan’s Income Tax Ordinance, 2001 has no separate inheritance tax. The questions for an heir abroad are whether the transfer on death creates a taxable gain, and what happens when the property is later sold. The answers below follow the Ordinance as amended to 30 June 2026, and the rates are those for tax year 2027 (1 July 2026 to 30 June 2027).

Is there tax when the property passes to me?

No gain arises on the transfer itself. Two provisions work together.

Section 75(2) says “The transmission of an asset by succession or under a will shall be treated as a disposal of the asset by the deceased at the time asset is transmitted.” The Ordinance treats the deceased, not the heir, as the person disposing of the asset.

Section 79(1)(b) says no gain or loss shall be taken to arise on a disposal “by reason of the transmission of the asset to an executor or beneficiary on the death of a person”. The Finance Act, 2026 added an explanation that transmission of immovable property on death “shall also include the transmission of assets by reason of family settlement amongst the family members consequent upon death of the person”. Where brothers and sisters settle among themselves who takes which property after a parent dies, that settlement is covered too.

Does living abroad change the answer?

Not for inheritance. Section 79(2) says sub-section (1) does not apply where the person acquiring the asset is non-resident at the time of acquisition, but only “in respect of disposal of an asset as mentioned in clauses (d), (e) and (f) of sub-section (1)”. Those clauses deal with compulsory acquisition, company liquidation and dissolution of an association of persons. Transmission on death is clause (b), so an heir in London or Riyadh gets the same treatment as an heir in Peshawar.

What happens when I sell the inherited property?

The sale is an ordinary disposal of Pakistani property. Section 37(1A) charges the gain under the head capital gains at the Division VIII rates, and section 236C requires the registering authority to collect advance tax from the seller at the Division X rate, which is 2.75% of the gross consideration for tax year 2027.

Is the 236C tax final for an overseas heir? A proviso to section 236C(1) makes the tax a final discharge in lieu of capital gains tax for a non-resident individual holding a POC, NICOP or CNIC “who had acquired the said immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA)”. An heir acquires by transmission, not by payment from those accounts. On a plain reading the proviso does not fit, and the text does not deal with inherited property specifically. The 236C tax then works as an adjustable payment under section 236C(2), and the capital gain is still to be worked out.

Which collection rate applies? The Tenth Schedule raises the 236C rate to 11.5% for a seller not on the active taxpayers’ list. Clause (111AC) of Part IV of the Second Schedule disapplies that increase for a non-resident individual holding a POC or NICOP on transactions taxed under section 236C. That clause does not depend on how the property was acquired, so it can apply to an inherited property. An heir with only a CNIC is not named in it.

What is my cost? This is where the law is not settled. Section 76(8A), added by the Finance Act, 2026, says that where immovable property “is acquired by an individual through inheritance, the cost of such property in the hands of that individual shall be the fair market value” on transfer to the beneficiary. Section 79(3)(b) says that where clause (b) applies, the heir is treated as acquiring the asset “for a cost equal to the cost of the asset for the person disposing of the asset”, which is the deceased’s cost. The Ordinance does not say which one governs, and this page does not resolve it.

Worked example (illustrative figures)

Hina lives in Melbourne and holds a NICOP. Her father bought a house in Faisalabad in 2001 for Rs. 3,000,000. He died in September 2026 and the house was transferred to her in December 2026, when its value for stamp duty was Rs. 24,000,000. She sells it in May 2027 for Rs. 30,000,000.

1. On transmission to Hina: no gain under section 79(1)(b).
2. Tax collected under section 236C on the sale: Rs. 30,000,000 x 2.75% = Rs. 825,000. Because Hina is a non-resident NICOP holder, clause (111AC) keeps this at 2.75% even if she is not on the active taxpayers’ list.
3. For comparison, a non-resident seller with only a CNIC who is not on the list: Rs. 30,000,000 x 11.5% = Rs. 3,450,000.
4. Gain, reading section 76(8A): Rs. 30,000,000 - Rs. 24,000,000 = Rs. 6,000,000.
5. Gain, reading section 79(3)(b): Rs. 30,000,000 - Rs. 3,000,000 = Rs. 27,000,000.

The Division VIII rate on that gain depends on which column applies. Division VIII separates property acquired on or before 30 June 2024 from property acquired after it, and the Ordinance does not say whether an heir’s acquisition date is the date of transfer to her or her father’s purchase date. This example stops before applying a rate for that reason. Whatever the final figure, the Rs. 825,000 is credited against it under section 236C(2).

What if the property is sold before it is transferred to the heirs?

Section 79(1)(b) also covers transmission to an executor. A sale by an executor, or by all heirs jointly, is still a disposal of Pakistani property, and section 236C applies to the seller or transferor. How the gain is split between several heirs is not addressed in the provisions on this page.

Common mistakes

• Treating inheritance as a sale by the heir. Section 75(2) makes it a disposal by the deceased, and section 79(1)(b) removes any gain.
• Assuming non-residents lose the section 79 relief. Section 79(2) limits it for non-residents only in clauses (d), (e) and (f).
• Assuming the overseas final-tax rule covers inherited property. That proviso is written for property acquired through an FCVA or NRVA.
• Treating the cost question as settled. Sections 76(8A) and 79(3)(b) give different answers.

What to check in the official text

Read section 75(2), section 79(1)(b) with its explanation, section 79(2) and (3), section 76(8A), section 37(1A), section 236C(1) and (2), Division X of Part IV and Division VIII of Part I of the First Schedule, rule 1 of the Tenth Schedule, and clause (111AC) of Part IV of the Second Schedule. Whether section 76(8A) applies to deaths before the Finance Act, 2026 took effect is not stated in the consolidated text. Succession certificates, mutation and provincial stamp duty are outside this corpus.