DEPRECIATION

 

        The income tax law allows the deduction of depreciation up to certain conditions which computing the taxable profit.
Conditions:
      Fallowing are the important conditions for the admissibility of the depreciation.

Entitled assets for depreciation:

   Building, Machinery, Plan and furniture are eligible assets for depreciation.
Building:
     It means a constructed structure and not a land. For example the building of factory.
Machinery:
     All kinds of machines which are used for the business purposes are called machinery.
Furniture:
    All the fittings are included in the furniture.
Plant:
      Vehicle aircraft or ship registered in Pakistan and surgical equipment which are used in business profession are also included in plant.

USE OF THE BUSINESS PURPOSE:

          Depreciation is allowed only those assets which have been used completely for the business or profession purposes.
           If one asset is being used for both the purposes business and personal then depreciation will be allowed according the business proportion.

Use during income year:

      It is also necessary that such assets have been used only during the income year.
TANGIBLE:
      In tangible assets like good will are not entitled for depreciation .Only tangible assets like building and machinery are eligible for depreciation.
DEPRECIATION RATE:
     In the income ordinance schedule 111 and rule two rates of depreciation had been prescribed.
Sale of asset: