This blog is written by Mr. Atif Jan, Audit Associate. Please read this blog and provide your comments.
Initial Allowance – (Section 23)
Initial Allowance is allowable @ 25% at the cost of an asset (15% in case of building) if the asset is used for business purpose in the tax year in which asset is placed into service in Pakistan or which commercial production is commenced whichever is later.
- Road transport vehicle not plying for hire.
- Furniture and fittings.
- Any plant or machinery that has been used previously in Pakistan.
- Asset allowed as tax expense.
- Building given on rent along with plant and machinery.
First Year Allowance – Section 23 A
Plant, machinery and equipment installed by any industrial undertaking set up in specified rural and under developed areas, and owned and managed by a company shall be allowed first year allowance @ 90% of the cost in lieu of initial allowance.
Accelerated depreciation to alternate energy projects – Section 23 B
Plant, machinery and equipment installed for generation of alternate energy by an industrial undertaking set up anywhere in Pakistan and owned and managed by a company shall be allowed first year allowance @ 90% in lieu of initial allowance.
Normal tax depreciation including initial allowance must be calculated even if income of a business entity is exempt and therefore tax WDV after the lapse of exemption period shall be the cost as reduced by total tax depreciation including allowance during the exemption period.