Federal Board of Revenue (FBR) has granted Rs30 billion as initial allowance to new business entities during fiscal year 2019/2020.
The concession of allowance has been granted under Section 23 of Income Tax Ordinance, 2001.
As per Section 23 the allowance has been granted as:
Section 23. Initial allowance.—
Sub-Section (1): A person who places an eligible depreciable asset into service in Pakistan for the first time in a tax year shall be allowed a deduction (hereinafter referred to as an “initial allowance”) computed in accordance with sub-section
(2), provided the asset is used by the person for the purposes of his business for the first time or the tax year in which commercial production is commenced, whichever is later.
Sub-Section (2): The amount of the initial allowance of a person shall be computed by applying the rate specified in Part II of the Third Schedule against the cost of the asset.
[The rate of initial allowance under section 23 shall be 25 percent for plant and machinery.]
Sub-Section (3): The rules in section 76 shall apply in determining the cost of an eligible depreciable asset for the purposes of this section.
Sub-Section (4): A deduction allowed under this section to a leasing company or an investment bank or a modaraba or a scheduled bank or a development finance institution in respect of assets owned by the leasing company or the investment bank or the modaraba or the scheduled bank or the development finance institution and leased to another person shall be deducted only against the leased rental income derived in respect of such assets.
(5) In this section, “eligible depreciable asset” means a depreciable asset other than —
(a) any road transport vehicle unless the vehicle is plying for hire;
(b) any furniture, including fittings;
(c) any plant or machinery that has been used previously in Pakistan; or
(d) any plant or machinery in relation to which a deduction has been allowed under another section of this Ordinance for the entire cost of the asset in the tax year in which the asset is acquired.
The FBR granted a sum of Rs36.43 billion as allowances including the initial allowance during fiscal year 2019/2020.
Under Section 23A an amount of Rs335 million has been granted as first year allowance under the head of industrial undertaking set up in specified rural and under developed areas or engaged in the manufacturing of cellular mobile phones.
An amount of Rs477 million has been granted concessions under Section 60 of the Income Tax Ordinance, 2001 for persons paying Zakat.
The FBR granted concession of Rs2.45 billion under Section 60A for persons paying Workers’ Welfare Fund. Another amount of Rs2.72 billion has been granted as allowance under Section 62B for persons paying workers’ participation fund.
An amount of Rs285 million has been granted as allowance under Section 60C for individuals paying profit or share in rent and share in appreciation for value of house on loan by banks etc.
The FBR granted Rs154 million as deductible allowance for education expenses under Section 60D.