ISLAMABAD: The Federal Board of Revenue (FBR) has restored 100 per cent depreciation deduction on a depreciable asset used in a person’s business for the first time.
The FBR restored the depreciation deduction on the basis of amendment brought through Finance Act, 2022.
The revenue body issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.
The FBR said that Finance Act, 2020 introduced restriction on claim of depreciation deduction by fifty percent on a depreciable asset used in a person’s business for the first time. In continuation thereof, the person was allowed fifty percent deprecation deduction in the year of disposal of such depreciable assets.
Now this restriction has been lifted and a person who introduces a depreciable asset in his business for the first time will be entitled to claim hundred percent deprecation deduction.
The corresponding entitlement to claim fifty percent depreciation deduction during the year of disposal has been withdrawn.
Furthermore, the cost of a depreciable asset being passenger transport vehicle not plying for hire was restricted to two and half million rupees for the purpose of deprecation deduction. This limit has been enhanced to seven and half million rupees.
Immovable property or structural improvement to the immovable property have been excluded from the definition of eligible depreciable asset for the purposes of initial allowance.