Advance Income tax

Advance Tax Under Section 147

Subject to sub-section (2) of section 147, every taxpayer whose income was charged to tax for the latest tax year under this Ordinance or latest assessment year under the repealed Ordinance other than;

(a)    income chargeable to tax under the head “Capital Gains”;

(b)    income chargeable to tax under sections 5, 6 and 7;

(ba) income chargeable to tax under section 15;

(c)    income subject to deduction of tax at source under section 149; or

(ca) income chargeable to tax under section 233 and clauses (a) and (b) of sub-section (1) of section 233A

(d)    income from which tax has been collected under Division II or deducted under Division III and for which no tax credit is allowed as a result of sub-section (3) of section 168,  shall be liable to pay advance tax for the year in accordance with this section.

Formula for AOP’s and Companies;

Where the taxpayer is an association of persons or a company, the amount of advance tax due for a quarter shall be computed according to the following formula, namely;

(A x B/C) –D

Where;

A; is the taxpayer ‘s turnover for the quarter;

B; is the tax assessed to the taxpayer for the latest tax year;

C; is the taxpayer ‘s turnover for the latest tax year; and

D; is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax deducted under section 155.

Formula for Individuals;

Where the taxpayer is an individual 5 having latest assessed income of five hundred thousand rupees or more as determined under sub-section (2), the amount of advance tax due for a quarter shall be computed according to the following formula, namely: –

(A/4) – B

Where –

A; is the tax assessed to the taxpayer for the latest tax year or latest assessment year under the repealed Ordinance; and

B; is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax deducted under section 149 or 155.

Persons not responsible for payment of advance tax;

Advance tax under section 147 will be payable by every person whose income is taxable except the following;

  1. Income Chargeable to tax
  2. Section 5; Dividend Income
  3. Section 6; Income of Non-resident person
  4. Section 7; Air transport and shipping income of non-resident person;
  5. Income subject to deduction of tax at source under salary Income (149).
  6. Income covered under section 168(3).

Credit for Tax collected or deducted;

No tax credit shall be allowed for any tax collected or deducted that is a final tax under

  1. sub-section (7) of section 148; (Imports)
  2. sub-section (3) of section 151; (Profit on Debt)
  3. sub-section (1B) and (1BB) of section 152; (Payment to non-residents)
  4. sub-section (3) of section 153; (contracts)
  5. sub-section (4) of section 154; (Exports)
  6. sub-section (3) of section 156; (Winning of Prize)
  7. sub-section (2) of section 156A; (Petroleum)
  8. sub-section (3) of section 233; (Commission)
  9. sub-section (3) of section 234A. (CNG Stations)

Exemptions;

This section does not apply to an individual where the individual’s latest assessed taxable income excluding income referred to above is less than one million rupees.

Time of Payment;

Advance tax is payable by an individual to the Commissioner;

  1. in respect of the September quarter, on or before the 15th day of September;
  2. in respect of the December quarter, on or before the 15th day of December;
  3. in respect of the March quarter, on or before the 15th day of March; and
  4. in respect of the June quarter, on or before the 15th day of June

Advance tax shall be payable by an association of persons or a company to the Commissioner;

  1. in respect of the September quarter, on or before the 25th day of September;
  2. in respect of the December quarter, on or before the 25th day of December;
  3. in respect of the March quarter, on or before the 25th day of March; and
  4. in respect of the June quarter, on or before the 15th day of June.

Intimidation not Option;

  1. Advance tax is always in relation to expected tax liability and not anything which has no nexus what so ever with one’s admitted liability for the relevant tax year.
  2. Now a taxpayer who knows that he is going to meet heavy losses has no option but to pay advance tax on the basis of turnover.
  3. The obligation to pay advance tax now arises where some income was charged to tax in the latest tax year or assessment year under the repealed Ordinance and not otherwise.
  4. Consequential amendment has also been made in sub-section (4) for calculating advance tax liability on the basis of turnover of the latest assessment year under the repealed Ordinance or the latest tax year as the case may be

Excess Advance Tax;

A tax credit or part of a tax credit allowed under this section for a tax year that is not able to be credited under sub-section (3) of section 4 for the year shall be refunded to the taxpayer in accordance with section 170.

Downward Estimation;

If a taxpayer considers that his ultimate tax liability u/s 147 would be less than actual estimate at the start of tax year, then the taxpayer is allowed to file a revised (downward) estimate before last installment is due (4th installment). And accordingly will pay adjusted amount in downward direction.

Upward Estimation;

If a taxpayer considers that his ultimate tax liability u/s 147 would be more than actual estimate at the start of tax year, then the taxpayer is required to file a revised (downward) estimate before the second installment is due (2nd installment). And accordingly will pay adjusted amount in upward direction.

Advance tax for Non-Filer and Sales tax registered persons;

Every provincial sales tax registered person shall be liable to pay adjustable advance tax at the rate of three per cent of the turnover declared before the provincial revenue authority. The advance tax under sub-section (1) shall be paid monthly at the time when sales tax return is to be filed with the provincial revenue authority. Advance tax paid under this section may be taken into account while working out advance tax payable under section 147.

Default surcharge for delay or failure to pay advance tax under section 205;

Where a person who commits any of the following defaults:

  1. fails to pay any tax, excluding the advance tax under section 147; or
  2. fails to pay any installment; or
  3. fails to pay any installment on or before the specified date: or
  4. fails to pay the full amount payable by him;
  5. any amount referred to in section 140 or 141;

He becomes liable to pay default surcharge at the rate of 12%. Such default surcharge is calculated from due date of payment to the date on which it is actually paid.

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