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Non-recognition rules
(1) For the purposes of this Ordinance and subject to sub-section (2), no gain or loss shall be taken to arise on the disposal of an asset –
(a) between spouses under an agreement to live apart;
(b) by reason of the transmission of the asset to an executor or beneficiary on the death of a person; Explanation: For the removal of doubt it is clarified that transmission of immovable property, to a beneficiary on the death of a person shall also include the transmission of assets by reason of family settlement amongst the family members consequent upon death of the person.
(c) by reason of a gift of the asset to a relative, as defined in sub-section (5) of section 85 ;
(d) by reason of the compulsory acquisition of the asset under any law where the consideration received for the disposal is reinvested by the recipient in an asset of a like kind within one year of the disposal;
(e) by a company to its shareholders on liquidation of the company; or (f) by an association of persons to its members on dissolution of the association where the assets are distributed to members in accordance with their interests in the capital of the association.
(2) Sub-section (1) shall not apply where the person acquiring the asset is a non-resident person at the time of the acquisition in respect of disposal of an asset as mentioned in clauses (d),
(e) and (f) of sub-section (1) .
(3) Where clause (a), (b), (c),
(e) or (f) of sub-section (1) applies, the person acquiring the asset shall be treated as —
(a) acquiring an asset of the same character as the person disposing of the asset; and (b) acquiring the asset for a cost equal to the cost of the asset for the person disposing of the asset at the time of the disposal.
(4) The person’s cost of a replacement asset referred to in clause (d) of sub-section (1) shall be the cost of the asset disposed of plus the amount by which any consideration given by the person for the replacement asset exceeds the consideration received by the person for the asset disposed of. PROVISIONS GOVERNING PERSONS PART I CENTRAL CONCEPTS Division I Persons
(a) between spouses under an agreement to live apart;
(b) by reason of the transmission of the asset to an executor or beneficiary on the death of a person; Explanation: For the removal of doubt it is clarified that transmission of immovable property, to a beneficiary on the death of a person shall also include the transmission of assets by reason of family settlement amongst the family members consequent upon death of the person.
(c) by reason of a gift of the asset to a relative, as defined in sub-section (5) of section 85 ;
(d) by reason of the compulsory acquisition of the asset under any law where the consideration received for the disposal is reinvested by the recipient in an asset of a like kind within one year of the disposal;
(e) by a company to its shareholders on liquidation of the company; or (f) by an association of persons to its members on dissolution of the association where the assets are distributed to members in accordance with their interests in the capital of the association.
(2) Sub-section (1) shall not apply where the person acquiring the asset is a non-resident person at the time of the acquisition in respect of disposal of an asset as mentioned in clauses (d),
(e) and (f) of sub-section (1) .
(3) Where clause (a), (b), (c),
(e) or (f) of sub-section (1) applies, the person acquiring the asset shall be treated as —
(a) acquiring an asset of the same character as the person disposing of the asset; and (b) acquiring the asset for a cost equal to the cost of the asset for the person disposing of the asset at the time of the disposal.
(4) The person’s cost of a replacement asset referred to in clause (d) of sub-section (1) shall be the cost of the asset disposed of plus the amount by which any consideration given by the person for the replacement asset exceeds the consideration received by the person for the asset disposed of. PROVISIONS GOVERNING PERSONS PART I CENTRAL CONCEPTS Division I Persons
Amendment history (6)
- Added by the Finance Act, 2012.
- Explanation inserted by the Finance Act, 2026.
- Inserted by the Finance Act, 2018.
- Inserted by the Finance Act, 2021.
- Expression inserted by the Finance Act, 2026.
- The expression “Companies Ordinance, 1984 (XLVII of 1984)” substituted by the Finance Act, 2021.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 147
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.