Company formation
Depreciation on Business Assets
Section 22 allows a deduction computed by applying the Third Schedule rate to the written down value at the start of the year. Computer hardware is 30% where general machinery is 10%, and there is a separate initial allowance in the year an asset is first used, again 30% for hardware. Failing to withhold tax on a capital purchase removes that cost from the base permanently.
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Where these figures come from
- Statutory basis
- Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
- Last checked against the statute
- by BarrioVibe, which files income tax returns through FBR IRIS.
These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.
The rates, and why an IT firm should care
Third Schedule Part I, applied to the written down value. Note the gap between computer hardware and everything else it might otherwise be grouped with.
| Asset class | Rate on written down value |
|---|---|
| Computer hardware, including printer, monitor and allied items | 30% |
| Technical or professional books | 20% |
| Machinery and plant, not otherwise specified | 10% |
| Furniture, including fittings | 10% |
| Factory, workshop, cinema, hotel, hospital | 10% |
| Building, not otherwise specified | 5% |
Reducing balance, not straight line
Section 22(2) computes the deduction by applying the rate against the written down value at the beginning of the year, not against the original cost. So a workstation at 30 per cent gives you 30 per cent of cost in the first year, then 30 per cent of the remaining 70, and so on.
One consequence is worth stating plainly: on the rate alone an asset never reaches zero. The tail is dealt with on disposal rather than by the rate running out, which is why the written down value at disposal matters and why keeping the schedule accurate over years is not merely bookkeeping.
What this means for a software house buying equipment
A firm equipping a development team is buying almost entirely into the fastest class the Schedule has. The same rupee spent on a workstation is relieved three times faster than a rupee spent on generic plant, and it also carries double the initial allowance.
That is a real planning point rather than a curiosity, because it changes the after-tax cost of hardware relative to other spending, and it applies to the printers and monitors alongside the machines. It is also one of the few places in the Ordinance where the IT sector is favoured by the ordinary rules rather than by a special regime that has to be applied for.
What the deduction is worth against your income
Depreciation reduces business income before the rate table applies, so its value depends on the band you are in. Enter your taxable income to see the marginal rate the deduction is actually saving you.
Business & AOP TaxQuestions
The questionspeople ask
What is the depreciation rate for computers in Pakistan?
30 per cent of written down value under Third Schedule Part I, for computer hardware including printer, monitor and allied items. That is three times the 10 per cent general rate for machinery and plant not otherwise specified.
Is depreciation calculated on cost or written down value?
Written down value. Section 22(2) applies the Third Schedule rate to the written down value at the beginning of the year, so it is a reducing balance rather than straight line and the asset never reaches zero on the rate alone.
What is the initial allowance?
A separate allowance under Third Schedule Part II, taken in the year the asset is first used and in addition to ordinary depreciation. Buildings 10 per cent, furniture and general machinery and vehicles 15 per cent, and computer hardware 30 per cent.
Can I lose depreciation for not deducting withholding tax?
Yes, and permanently. The proviso to section 22(1) provides that depreciation is not allowed for the amount paid for a capital asset in all relevant tax years where tax deductible under section 152 or 153 was not deducted and deposited, because the amount is not added to the assets for computing depreciation.
What is the depreciation rate for buildings in Pakistan?
5 per cent of written down value for a building not otherwise specified, and 10 per cent for a factory, workshop, cinema, hotel or hospital, and for residential quarters for labour.
Does equipment for making IT products get the higher rate?
For the initial allowance, yes. Third Schedule Part II expressly includes machinery and equipment used in the manufacture of IT products in the 30 per cent class alongside computer hardware, aircraft and aero engines.
Can I claim depreciation on an asset I have not started using?
No. Section 22(1) allows the deduction for depreciable assets used in the person's business in the tax year, so an asset bought but not yet in use has not begun to depreciate for tax.
Are there other deductions I can lose for non-compliance?
Yes, and the pattern is worth noticing. Where a person required to integrate with the Board through an approved fiscal electronic device fails to do so, expenditure attributable to sales is disallowed, capped at eight per cent of the allowable deduction.
Also here
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Rather have someone handle it?
We file returns through IRIS every day. If the answer above raises a question about your own case, that is the conversation to have before the deadline rather than after it.