Karachi, January 18, 2024 – In a move aimed at facilitating businesses and promoting transparency, the Federal Board of Revenue (FBR) has officially notified the depreciation rates for the Tax Year 2024.
The updated rates, as per the amendments to the Income Tax Ordinance, 2001, were unveiled today, providing clarity for businesses and taxpayers regarding the deduction of depreciation for various assets.
The FBR’s notification outlined the depreciation rates applicable for different categories of assets under section 22 of the Income Tax Ordinance. These rates play a crucial role in determining the amount businesses can deduct for the wear and tear of their depreciable assets, ultimately impacting their taxable income. The updated rates are as follows:
I. Building (all types): 10% II. Furniture (including fittings) and machinery, plant (not otherwise specified), Motor vehicles (all types), ships, technical or professional books: 15% III. Computer hardware including printer, monitor, and allied items, machinery and equipment used in the manufacture of I.T. products, aircraft, and aero engines: 30% IV. In the case of mineral oil concerns, the income of which is liable to be computed in accordance with the rules in Part-I of the Fifth Schedule. (b) Offshore platform and production Installations: 20% V. A ramp built to provide access to persons with disabilities not exceeding Rs.250,000 each: 100%
The depreciation rates specified in the notification offer a clear framework for businesses to calculate their deductions in accordance with the written down value of their assets at the beginning of the tax year. This aligns with the provisions outlined in Part I of the Third Schedule of the Income Tax Ordinance.
Furthermore, the notification addresses scenarios where depreciable assets are utilized for both business and non-business purposes. In such cases, the deduction allowed under section 22 is restricted to the fair proportional part of the amount that would be allowed if the asset was solely used to derive income from business chargeable to tax.
Depreciation, as outlined in the Income Tax Ordinance, allows businesses to account for the reduction in value of their assets over time. The FBR’s initiative to update and notify depreciation rates for the Tax Year 2024 is a positive step toward providing businesses with a transparent and predictable tax environment. It not only assists businesses in accurately calculating their taxable income but also ensures compliance with tax regulations, fostering a conducive environment for economic growth and development.
