Lahore 22°C
Initial allowance
(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 .
(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.
(3) The rules in section 76 shall apply in determining the cost of an eligible depreciable asset for the purposes of this 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 ;
(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 ; or (e) immovable property or structural improvement to the immovable property.
(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.
(3) The rules in section 76 shall apply in determining the cost of an eligible depreciable asset for the purposes of this 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 ;
(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 ; or (e) immovable property or structural improvement to the immovable property.
Amendment history (11)
- Full stop substituted by Finance Act, 2017.
- Added by the Finance Act, 2017.
- Sub-section (4) substituted by the Finance Act, 2002. The substituted sub-section (4)
- The words and comma “that is plant and machinery,” omitted by the Finance Act, 2003.
- The words “that is acquired second hand” substituted by the Finance Act.2003
- The word “or” omitted by the Finance Act, 2022.
- Inserted by the Finance Act, 2008.
- Section 23A omitted by the Finance Act, 2021. Earlier this omission was made through Tax Laws
- Inserted by the Finance Act, 2009.
- In sub-section 4 of section 24 is substituted by the Finance Act, 2019, the substituted sub-section
- The expression “twenty-five years” substituted by the Finance Act, 2025.
Amendment notes captured from the source page(s); they may include changes to neighbouring provisions.
Source FBR PDF page 74
Unofficial reference, compiled from the FBR’s consolidated Income Tax Ordinance 2001 (amended up to 30 June 2026). Provided for general information only — not an official FBR publication and not legal or tax advice. Always verify against the official FBR text before relying on it for filing or any decision.