This blog is written by Mr. Muhammad Nabeel Ahmed. Please read this blog and provide your valued comments

Definition of Advance Tax:

“Advance tax is nearly a provisional payment of an amount towards due tax. Therefore, it is a supplementary tax collection system, which is finally adjust it in the tax payable of the taxpayer.”

Scope of Advance tax u/s 147 of ITO 2001:

 Individuals:

 

Subject to the exceptions as discussed below every individual who has been charged to tax liability for latest tax/assessment year is liable to pay Advance Tax every quarter under the section 147 one of the Income Tax Ordinance 2001.

 

AOP/Company:

 

Subject to the exceptions discussed below every AOP and Company is liable to pay Advance Tax even if there is no tax due on last assessed income or turnover under the section 147(6A) of the Income Tax Ordinance 2001.

 

In the absence of Tax on latest assessed income/turnover the AOP/Company shall be liable to advance tax on the basis of the quarterly turnover after adjusting the tax payable under Section 113 and any other taxes if already paid.

 

Exceptions from the provisions of Advance Tax u/s 147 of the ITO 2001

 

“Person deriving income from the following sources are not required to deduct advance tax under section 147 of the income tax ordinance 2001:

 

  • Dividend under Section 5 of ITO 2001
  • Tax on certain payments to non-residents (Section 6)
  • Shipping and air transport (Section 7)
  • Income subject to deduction of tax at source under the head salary under section 149; and
  • Income under the heads of income on which tax has been collected as final tax liability and no tax credit is allowed as result of Section 168(3) of the Income Tax Ordinance, 2001
  • Individuals who is latest excess taxable income is less than 1 million are not required to pay Advance Tax section 147 2 of the Income Tax Ordinance 2001.

 

Time of payment

Individuals are required to pay Advance tax u/s 147(5) of the ITO, 2001 on 15th of:

  • September
  • December
  • March
  • June

 

 

In case of AOP and Company the payment of advance tax under section 147(5A) of the Income Tax Ordinance 2001 shall be made on the following dates of the following month:

  • 25th of September
  • 25th of December
  • 25th of March
  • 15th of June

Computation of Advance tax

For an AOP and a Company, the amount of advance tax due for a quarter shall be computed using the following formula:

 

(A x B/C) – D

 

  • A is turnover for the quarter;
  • B is the tax assessed to the tax payer for the latest tax year;
  • C is the turnover for the latest tax year; and
  • D is the tax paid in the quarter for which tax credit is allowed u/s 168

 

Where the taxpayer is an individual having latest assessed income of 1,000,000 or more as determined the amount of advance tax due for a quarter shall be computed according to the following formula,

 

“(A/4)- B

 

  • 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

 

 

Minimum Tax:

 

Tax liability u/s 113 shall also be taken into account while working out payment of advance tax liability. Section 147(4AA). This means that if the minimum tax for the quarter turns out to be more than the advance tax calculated u/s 147(4) then the minimum tax shall be payable as advance tax for that quarter.

 

Penalty for non- payment of Advance Tax:

 

Section 205(1B) provides that if advance tax is not paid or the tax so paid is less than 90 percent of the tax chargeable for the relevant tax year, he shall be liable to pay default surcharge at the rate of 12 percent per anum on the amount by which the tax paid by him falls short of 90%.

 

Case Laws: –

 

Hereby I mentioned some case laws related to Section 147 of ITO, 2001:

  • 2017 PTD 1774- LHC
  • 2011 PTD 1996- SHC
  • 2011 PTD 476- SHC

 

 

MUHAMMAD NABEEL AHMED

SEPTEMBER 15, 2020

MNA BLOG 15092020