Can a doctor claim depreciation on an ultrasound machine, dental chair or other practice equipment?

Equipment is usually the largest purchase a clinic or practice makes, and the Income Tax Ordinance, 2001 does not let its cost be deducted in one go. Section 20(2) sends any asset with a useful life of more than one year to depreciation, and the rules for that are in sections 22 and 23 and the Third Schedule.

What does the law say?

Which assets qualify? Section 22(15) defines a “depreciable asset” as tangible movable property, immovable property (other than unimproved land) or a structural improvement to immovable property that:

1. has a normal useful life exceeding one year;
2. is likely to lose value through normal wear and tear or obsolescence; and
3. is used wholly or partly by the person in deriving income from business chargeable to tax.

An ultrasound machine, a dental chair, an autoclave, clinic furniture, a laptop or a law library all meet that description when they are used in the practice.

Section 22: annual depreciation. Section 22(2) applies the rate in Part I of the Third Schedule to the asset’s written down value at the beginning of the year. The written down value falls each year by the depreciation already allowed, so the deduction shrinks over time.

Section 23: initial allowance. A person who places an eligible depreciable asset into service in Pakistan for the first time in a tax year gets an extra first-year deduction at the rate in Part II of the Third Schedule, applied to cost. Part II sets that rate at 25% for plant and machinery. Section 23(5) excludes from “eligible depreciable asset”:

• road transport vehicles, unless plying for hire;
• furniture, including fittings;
• plant or machinery that has been used previously in Pakistan;
• plant or machinery whose entire cost was deducted under another section in the year of purchase; and
• immovable property or structural improvements to it.

What rates apply?

Part I of the Third Schedule, as it stands in the text amended to 30 June 2026, sets these rates on written down value:

Class	Rate
Building (all types)	10%
Furniture (including fittings), machinery and plant (not otherwise specified), motor vehicles (all types), technical or professional books	15%
Computer hardware including printer, monitor and allied items	30%
A ramp built to provide access to persons with disabilities, not exceeding Rs. 250,000 each	100%

The Schedule has no separate class for medical, dental or laboratory equipment. Whether a particular item, such as a dental chair, is machinery and plant or furniture is not answered by the text. The annual rate is 15% either way, but the answer matters for the initial allowance, which furniture does not get.

Worked example (illustrative figures)

Dr. Sana Iqbal runs a clinic in Faisalabad. In tax year 2027 she buys, all new and never used in Pakistan before:

• an ultrasound machine for Rs. 4,000,000, treated here as machinery and plant;
• clinic furniture for Rs. 400,000;
• a computer and printer for Rs. 200,000.

Ultrasound machine

1. Initial allowance: 25% of Rs. 4,000,000 = Rs. 1,000,000.
2. Written down value for the first year: Rs. 4,000,000 minus Rs. 1,000,000 = Rs. 3,000,000 (section 22(5)(a)).
3. Depreciation: 15% of Rs. 3,000,000 = Rs. 450,000.
4. First-year total: Rs. 1,000,000 + Rs. 450,000 = Rs. 1,450,000.

Furniture: no initial allowance. 15% of Rs. 400,000 = Rs. 60,000.

Computer and printer: 30% of Rs. 200,000 = Rs. 60,000. The example claims no initial allowance on it, because the Schedule lists computer hardware as its own class and does not say whether it also counts as plant and machinery for Part II.

Total deduction for tax year 2027: Rs. 1,450,000 + Rs. 60,000 + Rs. 60,000 = Rs. 1,570,000.

Second year for the ultrasound: opening written down value is Rs. 4,000,000 minus Rs. 1,450,000 = Rs. 2,550,000, and depreciation is 15% of that, Rs. 382,500.

What if …?

What if the equipment is second-hand? It is still depreciable under section 22. If it is plant or machinery used previously in Pakistan, section 23(5)(c) denies the initial allowance.

What if I use the asset partly for personal purposes? Section 22(3) restricts the deduction to the fair proportional part for business use. A car used for house calls and family trips is the usual case. Section 22(13)(a) also caps the cost of a passenger vehicle not plying for hire at Rs. 7.5 million for depreciation.

What if I sell the machine later? Section 22(8) gives no depreciation in the year of disposal. If the sale price is above written down value, the excess is business income; if below, the shortfall is deductible.

What if I buy the clinic building? Buildings are in the 10% class, the cost of the land is excluded under section 22(13)(b), and immovable property gets no initial allowance.

Common mistakes

• Expensing the whole cost. Section 20(2) requires depreciation for assets with a useful life over one year.
• Claiming the initial allowance on furniture or cars. Section 23(5) excludes both, unless the vehicle is plying for hire.
• Ignoring withholding on the purchase. The proviso to section 22(1) denies depreciation on an amount paid to a seller for a capital asset where the tax the Ordinance required to be deducted from that payment was not deducted and deposited.
• Depreciating beyond cost. Section 22(7) caps total depreciation and initial allowance at the asset’s cost.

What to check in the official text

Read section 22, including the definitions in sub-section (15), and section 23(5) for the exclusions from initial allowance. The rate tables are in Parts I and II of the Third Schedule. The Third Schedule text reproduces an older, substituted table in a footnote; the rates above are from the current table that follows it.