Is gifting a property to my son, wife or brother taxable?

What does the law say?

Four rules in the Income Tax Ordinance, 2001 decide how a property gift is taxed.

No gain for the giver. Section 79(1)(c) says no gain or loss shall be taken to arise on the disposal of an asset “by reason of a gift of the asset to a relative, as defined in sub-section (5) of section 85”. Without this rule, handing over a property would be a disposal like any other.

Who is a relative. Section 85(5) defines “relative”, in relation to an individual, as:

• an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual or of the individual’s spouse; or
• a spouse of the individual or of any of those persons.

That covers the three people in the question. A son is a descendant of your grandparents. A wife is your spouse. A brother is a descendant of your grandparents. It also reaches further than many expect: parents, grandparents, sisters, grandchildren, nephews, nieces and cousins are descendants of your grandparents, and a spouse’s relatives and the spouses of your relatives are included too.

The recipient takes over your cost. Section 79(3) says that where clause (c) applies, the person acquiring the asset is treated as acquiring an asset of the same character as you held, “for a cost equal to the cost of the asset for the person disposing of the asset at the time of the disposal”. The gain is not wiped out. It is postponed until the recipient sells.

Gifts from outside the family are income. Section 39(1)(la) brings under “Income from Other Sources” “any amount or fair market value of any property received without consideration or received as gift, other than gift received from” a relative as defined in section 85(5).

How does it work in practice?

For a gift to a relative, nobody has a capital gain on the day of the gift, and the recipient has no income under section 39(1)(la). When the recipient eventually sells, the gain is computed from your original cost.

For a gift to someone who is not a relative, section 79(1)(c) does not apply. The recipient is taxed on the fair market value of the property as income from other sources. On your side, the gift is still a disposal, and section 77(1) measures consideration as the amount received “or the fair market value thereof, whichever is the higher”. With nothing received, that points to the property’s fair market value as your consideration.

Advance tax on registration. Section 236C requires the person registering, recording or attesting a transfer of any immovable property to collect advance tax from the “seller or transferor”, and section 236K requires collection from the “purchaser or transferee”. A donor is a transferor and a donee is a transferee, and neither section contains an exception for gifts to relatives. The rate divisions measure the section 236C tax on the gross amount of the consideration received and the section 236K tax on fair market value. The text does not say how the section 236C figure is set where no consideration passes. This page does not resolve whether or how either tax is collected on a gift deed.

Worked example (illustrative figures)

Tariq bought a house in Faisalabad in 2018 for Rs. 6,000,000. In 2026, when it is worth Rs. 15,000,000, he gifts it to his son Hamza. In 2027 Hamza sells it for Rs. 18,000,000. Ignore incidental costs.

1. Tariq on the gift. Hamza is a relative, so section 79(1)(c) applies: no gain for Tariq.
2. Hamza on receipt. The gift is from a relative, so section 39(1)(la) does not apply: no income for Hamza.
3. Hamza’s cost. Under section 79(3)(b), Tariq’s cost: Rs. 6,000,000.
4. Hamza’s gain on sale. Rs. 18,000,000 - Rs. 6,000,000 = Rs. 12,000,000, taxed at the Division VIII rate that applies to his sale.

Had Tariq gifted the house to his business partner instead, the partner would have Rs. 15,000,000 of income from other sources in the year of the gift under section 39(1)(la), and Tariq would have a disposal measured at fair market value.

What if I gift property and the recipient sells it quickly?

Section 79 has no minimum holding condition for gifts in the text amended to 30 June 2026. Since the recipient inherits your cost, a quick sale simply taxes your built-up gain in their hands. Which Division VIII column applies to the recipient, and from which date the holding period runs, is not spelled out; section 79(3)(a) only says the asset keeps “the same character”.

Common mistakes

• Treating a gift to a friend like a gift to family. Only relatives within section 85(5) get non-recognition, and a non-relative recipient has income under section 39(1)(la).
• Assuming the recipient starts at market value. Section 79(3)(b) gives the recipient your cost, not the value on the day of the gift.
• Assuming no advance tax because it is a gift. Sections 236C and 236K contain no gift exemption, although how they measure a gift is unclear in the text.

What to check in the official text

Read section 79(1)(c) and (3), section 85(5), section 39(1)(la), section 77(1), and sections 236C and 236K with Divisions X and XVIII of Part IV of the First Schedule. Stamp duty and provincial registration charges on gift deeds are outside this corpus and are not covered here.