Tax Book 2023

Assets and Depreciation Chapter- 10

CALCULATION OF DEPRECIATION:

Depreciation shall be allowed only on depreciable assets. Rules regarding calculation of depreciation

are as follows:

5. Where an asset not used for the whole of the year:

The depreciation on such asset shall be charged for the whole year e.g. assets used partly on

seasonal basis in sugar industry. [U/s 22(1)]

6. Where the useful life of an asset is one year:

No depreciation allowance shall be allowed however renewal or replacement cost shall be allowed as

revenue expenditure. [U/s 22(15)]

7. Rates of depreciation:

Depreciation shall be computed by applying the following rates against the written down value of the

asset at the beginning of the year [U/s 22(2)]:

SR.

Type of Assets Rate

1. Building (all types) 10%


2. Furniture (Including fitting) and machinery and plant, Motor vehicles (all types),
   ships, technical or professional books.

15%

3. Computer hardware including printer, monitor and allied items, Machinery and
   Equipment used in manufacture of IT products, aircrafts and aero engines, Aerial
   photographic apparatus.

30%

4. In case of mineral oil concerns the income of which is liable to be computed with
   the rules in Part I of the Fifth Schedule.
   (a) Offshore platforms and production installations.
   20%


5. A ramp build to provide access to persons with disabilities not exceeding
   Rs.250,000 each.

100%

7.1 Written down value at the beginning of the year [U/s 22(5)]

The above mentioned rates are applied on the written down value (WDV) of the asset at the

beginning of the year, which is determined as below:

(a) In case of asset acquired during the year:

Cost xxx

Less: Initial allowance (if asset is eligible depreciable asset) (xxx)

WDV at the beginning of the year xxx

(b) In any other case:

Cost xxx

Less: Initial allowance allowed in previous years (xxx)

Less: Depreciation allowed in previous years (xxx)

WDV at the beginning of the year xx

Explanation- For the removal of doubt, it is clarified that where any building, furniture, plant or
machinery is used for the purposes of business during any tax year for which the income from such
business is exempt, depreciation admissible under section 22(1) shall be treated to have been
allowed in respect of the said tax year and after expiration of the exemption period, written
down value of such assets shall be determined after reducing total depreciation deductions
including any initial allowance under section 23 in accordance with clauses (a) and (b) as
above of this sub-section.

7.2 Asset partly used for business:

Where an asset is partly used for business and partly for some other purpose then: