Cost of Depreciable Asset Exported or Transferred out of Pakistan

The depreciable asset which has been used by a person in Pakistan is exported or transferred out of Pakistan, the cost of such asset shall be the amount which is received on the disposal of the asset.

Initial Allowance for Depreciation

In order to avail initial allowance for depreciation, one should satisfy the following conditions:

1. Assets Eligible for Initial Allowance. Initial allowance for depreciation is admissible only in respect of depreciable assets.

2. Year of Allowability. Initial allowance for depreciation will be allowed on depreciable assets in the year asset is used for the purpose of business in Pakistan for the first time or the tax year in which commercial production is commenced whichever is later.

3. Rates of Initial Allowance. Initial allowance for depreciation is

4. allowed @ 50% for plant and machinery and 25% for building. In case of leasing company, bank etc. the deduction on account of initial allowance for depreciation shall be allowed against income from lease rentals only. Asset Must be Owned by the Person. Initial allowance for depreciation is allowed in respect of a depreciable asset if the same is owned by the person.

It must be noted that initial allowance for depreciation is not provided in the following cases:

1. A road transport vehicle not plying for hire.

2. A machinery or plant which has previously been used in Pakistan.

3. Any machinery or plant on which deduction has been allowed under another section of the Income Tax Ordinance, 2001.

4. Any furniture including fittings.

First Year Allowance (FYA)

Finance Act, 2008, has introduced this allowance. Following are the salient features of the allowance:

This allowance is admissible on plant, machinery and equipment installed by an industrial undertaking.

2. The asset must be installed in rural and under developed area as specified by the Federal Government.

The industrial undertaking should be owned and managed by a company and

3.the asset must be put to use after July 1, 2008.

4. The First Year Allowance will be provided at the rate of 90% of the cost, however, the asset will not be entitled for initial allowance.

The FYA has been provided in order to accelerate the industrial process in rural and under developed areas. Accelerated Depreciation

This allowance has been provided through Finance Act, 2009. The main features are as under: anywhere in Pakistan and owned and managed by a company.

3. The asset is put to use after July 1, 2009

This accelerated rate is admissible on plant, machinery and equipment installed for generation of alternate energy. 2 Such asset must be installed by an industrial undertaking set up

4. The accelerated depreciation rate in lieu of initial allowance in such cases will also be 90% of the cost

Accelerated depreciation to alternate energy project has been Dfa Ho provided to overcome the energy crisis being faced in the country.

Normal Depreciation (Rates Specified for Section 22)

Normal depreciation is to be calculated at the prescribed rate for various types of assets on the written down value of a depreciable asset.