Islamabad, September 4, 2025 – The Federal Board of Revenue (FBR) has issued detailed guidance regarding deductions allowed while computing tax on business income for the tax year 2025-26. The clarifications were released through the updated Income Tax Ordinance, 2001, reflecting the amendments introduced in the Finance Act, 2025. According to Section 20 of the Ordinance, businesses are entitled to claim deductions against income when expenses are incurred wholly and exclusively for business purposes. This provision ensures that genuine operational costs are excluded before arriving at the taxable income of a person or entity. The FBR explained that deductions extend to special cases as well. For example, where animals used for business purposes die or become permanently useless, taxpayers can claim deductions equal to the difference between the acquisition cost and any amount recovered from carcasses or residual value. This clause recognizes the practical losses businesses may face in agriculture, dairy, or related sectors. Further, the law clarifies that where expenditure results in acquiring depreciable assets, intangible assets with a useful life of more than one year, or pre-commencement expenses, such costs cannot be deducted outright. Instead, they must be depreciated or amortized over time in accordance with…