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LECTURE # 26
Furniture (including fittings) and Machinery and Plant (not otherwise specified), Motor Vehicles (all types), ships, technical or professional books
Computer hardware including printer, monitor and allied items, aircrafts and aero engines
15%
30%
In 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
Below ground installations b) Offshore platforms
a)
100% 20%
Special Provisions
1. Normal On WDV even for 1st time (Cost minus Depreciation initial allowance) Reducing balance method Section22(2) 2. Usage of machinery Admissible Proportionally in deriving income chargeable to tax & other usage Section 22(3)
3. Depreciation Full years depreciation is allowed, even if in the year of asset is purchased on the last date. Section 22(4) purchase
Initial Depreciation
PARTICULARS INCOME TAX ORDINANCE, 2001
Initial Allowance Eligible depreciable assets only Section 23 used for the first time in Pakistan Allowed on cost Rate 50% (Part II of the 3rd Schedule)
Special Provisions-continued
4. WDV on disposal
5. Leased asset
6. Maximum cost Rs. 1 Million of motor of Section 22 (10) and Section 22(13)(a) motor vehicle This provision shall not be applicable from 1-07-2005
Special Provisions-continued
7. Limitation on admissibility 8. Used assets exported Section 22(14) 9.Assets acquired with foreign Loans Not more than cost
1. 2. 3.
4. 5. 6. 7. 8.
Example
M/s. Sarfraz Limited is a manufacturing company. It purchased a bus worth Rs. 1,250,000 at the start of the tax year and expended Rs. 50,000 on its registration, etc. The bus is used for transportation of the employees of the company. Compute the depreciation to be allowed as deduction while computing the income of the company.
Answer
Total Actual cost [Rs. 1,250,000+Rs. 50,000] Rs. 1,300,000 Cost of the bus for depreciation purposes 1,000,000 Depreciation [Rs. 1,000,000 @ 15%] 1,50,000
Note: Initial allowance for depreciation is allowed on vehicles plying for hire. Section 23 (5) (a)
Tax Year 2006 Depreciation on actual cost 13,00,000 @ 15%=1,95,000
5,52,500
BUT
Selling price restricted to cost =Rs.1,000,000 W. D. V 4,25,000 Taxable amount 5,75,000 Conclusion: Advantage to exporter for lesser taxable income and ultimately lesser tax
200A
575,000
575,000
240,000
200B
3,35000
63,750
398,750
240,000
240,000
158,750
200C
158,750
54,188
2,12,938
240,000
212,938
200D
46,059
46059
240,000
46,059
200E
39,150
39.150
240,000
39,150
Patent Invention Design or Model Formula OR Process Copy right or other like property or right. Contractual rights. Any expenditure.
Admissible Deductions restricted proportionately. Cost of the Intangible Normal useful life (years). (Maximum Ten years). Amount of Amortization x used days Total Number of days in Tax year.
Admissible
Normal Rs. 1,27,5002=63,750 22(4) Depreciation Rate in Third Schedule W.D.V Rs. 7,22,500 22(6) 8,50,000(63,750+63,750
W.D.V
Disposal Gain/Loss