TAX AND DEPRECATION

TAX
GROUP MEMBERS
IQRA HAMID (PP-15007)
MAHA ALTAF (PP-15011)
MARYAM MAJID (PP-15013) DEPRECIATION
MADIHA REHMAN (PP-15016)
TAX
Taxes are a defined as mandatory payments of the contributors to the budget
determined by law or within some deadlines.
DIRECT TAXES:
A tax that is paid directly by an individual or organization to the imposing entity.

INDIRECT TAXES:
An indirect tax is a tax collected by an intermediary from the person who bears the
ultimate economic burden of the tax.
Customer Government

Client
DIRECT & INDIRECT TAXES

DIRECT INDIRECT
TAX TAX

EXCISE
INCOME CORPORATION WEALTH CUSTOM SALES DUTY
TAXES MATTER
• Taxes affect citizens
• Economy of the country
• Businesses, governance mechanisms etc.
• Not only revenue mobilization
• An effective system of taxation helps in formalization the economy
• Encourages economic growth
• Shapes political cohesion between tiers of the Government and results in increase in social
sector service delivery.
OBJECTIVES OF TAX

• Raising revenue

• Encouraging domestic industries

• Stimulating investment

• Promoting economic growth

• Ensuring price stability

TAX SYSTEM IN PAKISTAN
• Tax Year in Pakistan
• Taxable Income in Pakistan
• Tax Filling Status
• Tax Deductions & Allowances
• Real Property Tax
• Penalties
• Payroll Tax
• Tax Credits
• Tax Rates
DIFFERENT TAXES IN PAKISTAN
Federal Government is the only body which is empowered to levy and collect the
tax.
• Income Tax Ordinance, 2001

• Sales Tax Act,1990

FEDERAL
• Federal Excise Act, 2005

• Custom Act, 1969

• Capital Value Tax levied through Finance Act PROVINCIAL

• After that some Amendments.
PILLARS of the State in TAXATION IN PAKISTAN
LEIGISLATURE: PARLIAMENT
Make substantive legislation to impose different
JUDICIARY
taxes in the light of cannons of taxation

EXECUTIVE: TAX AUTHORITIES

Enforce the tax with efficiency & effectiveness EXECUTIVE

LEIGISLATURE

JUDICIARY: INTERPRETS TAX

Interprets tax laws to ensure the fair application
EFFECTS OF TAXES REFLECT BEHAVIOR OF
ECONOMY
• Analysis of taxation effects on GDP growth
• Analysis of income tax effects on Investment
• Analysis of sales taxes on household consumption pattern
• Increasing the tax base
• Increase the number of tax payers
• Efficient collection of income tax amount
• Reducing distortions and phasing out exemptions
• Reducing the compliance costs and government’s administrative cost
• Reduce inequality
 FAILURE OF ECONOMY IN PAKISTAN DUE
TO TAX

• Fear of Harassment by corrupt & incompetent TAX

officials
• Low TAX base
• Feels, waste to pay TAX
• Lack of Faith, in TAX law and procedure
• Declining Real
BUDGET PAKISTAN (2018-19)

FBR Revenue

Govt. Salaries & Pension Federal Budget

Mini Pension For Retired Defence Budget

Employee

Subsidies

PM Youth Interest Payment

SOURCE: DUNIYA NEWS
Programme
DEPRECIATION
• A reduction in the value of asset with the passage of time.
• All assets except land can be depreciated.
WHAT IS BASICALLY DEPRECIATION
CAUSES OF DEPRECIATION

CAUSES

Physical Passage of Consumption

Obsolescence
Deterioration Time
PHYSICAL DETERIORATION
OBSOLESCENCE
DEPLETION OF FIXED ASSETS
PASSAGE OF TIME
TYPES OF DEPRECIATION

DOUBLE
STRAIGHT LINE DECLINING
BALANCE

UNITS OF SUM-OF-THE-
PRODUCTION YEARS-DIGITS
TYPES OF DEPRECIATION
STRAIGHT LINE:
Depreciation Expense = (Cost – Salvage value) / Useful life
TYPES OF DEPRECIATION
DOUBLE DECLINING BALANCE:
Periodic Depreciation Expense = Beginning book value x Rate of depreciation
TYPES OF DEPRECIATION
UNITS OF PRODUCTION:
Depreciation Expense = (Number of units produced / Life in number of units) x (Cost –
Salvage value)
TYPES OF DEPRECIATION
SUM-OF-THE-YEARS-DIGITS:
Depreciation Expense = (Remaining life / Sum of the years digits) x (Cost – Salvage value)
ASSETS ELIGIBLE FOR DEPRECIATION
Tangible
Immovable
Property Movable
Property

Depreciable Furniture
Building
Asset

Structural
Machinery improvement
 TERMONOLIGIES USED IN DEPRECIATION
USEFUL LIFE:
• The estimated lifespan of a depreciable fixed asset during which it can be expected to contribute to company
operations.
• Number of production expected to be obtained from use of assets.

Residual value:
The value expected to remain when the asset is retired
at the end of useful life.

BOOK VALUE:
Also called net book value. This refers to the balance sheet amount at a point in time that reveals the cost minus
the amount of accumulated depreciation (book value has other meanings when used in other contexts, so this
definition is limited to its use in the context of PP&E).
FIXED ASSETS
• Fixed assets are a company's tangible, noncurrent assets that are used in its
business operations.
• An inventory item cannot be considered a fixed asset
• Enable their owner to carry on its operations
DEPRECIABLE COST
• The amount of cost that can be depreciated on an asset over time
• Not solely based on the purchase price of an asset.
• It is the cost minus the expected salvage value.
DEPRECIABLE COST
• The amount of cost that can be depreciated on an asset over time
• Not solely based on the purchase price of an asset.
• It is the cost minus the expected salvage value.
CONCLUSION
• So, all over we see that Taxes & Depreciation are necessary part of any account &
economy system.

• Both are an expense used to calculate profit, try to increase economy and reduces
the value of assets.

• Different accounting policies for depreciation are adopted by different enterprises

that was similar with Tax.