Advance Tax Under Income Tax Ordinance 2001

Advance Tax under Section 147

According to Section 147 of the Income Tax Ordinance, 2001, “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whose income was charged to tax for the latest tax year under this Ordinance or latest assessment year under the repealed Ordinance other than –

• dividend income
• certain payments to non-residents-royalty, fee for offshore digital services, fee for money transfer
  operations, card network services, payment gateway services, interbank financial
  telecommunication services or fee for technical services;
• salary income;
• income chargeable to deduction of tax at source or advance payment of tax under  sections other than Section 147 of Income Tax Ordinance 2001
•  an individual where the individual’s latest assessed taxable income excluding above referred classes of income, is less than one million

Calculation of Advance Tax

Companies and Association of Persons

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

[Provided that where the taxpayer fails to provide
turnover or the turnover for the quarter is not known, it
shall be taken to be one-fourth of one hundred and twenty
percent of the turnover of the latest tax year for which a
return has been filed;]
B is the tax assessed to the taxpayer for the latest tax year

[“Explanation.- For removal of doubt it is clarified
that tax assessed includes tax under sections 113 and
113C.”]

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

Example

For example if turnover of a taxpayer for a quarter is Rs.300,000, tax assessed for the latest tax year Rs. 100,0000, turnover for latest tax year  is Rs.1,000,000, tax paid in the quarter for which tax credit is allowed       Rs. 20,000.  Advance tax under Section 147 of the Income Tax Ordinance 2001 for the quarter will be calculated as under:

A= Rs.300,000

B= Rs. 100,000

C= Rs. 1,000,000

D= Rs. 20,000

=(300000*100000/1000000)-20000 = 30,000-20,000

Advance Tax Payable for Quarter = Rs. 10,000

Individuals

In case of individual liable to pay advance tax, the tax payable for the quarter will be calculated as under:

(A/4)-B

where      A=  the tax assessed to the taxpayer for the latest tax year

B= the tax paid in the quarter for which a tax credit is allowed under section168, other than tax                               deducted under section 149 (Salary income)

For instance tax assessed to the taxpayer (individual) for the latest tax year (2022) is Rs. 100,000 and tax paid in the first quarter of 2023 for which a tax credit is allowed under Section 168, is Rs. 10,000. The advance tax payable by the individual for first quarter is as given below:

A=  Rs. 100,000

B= Rs. 10,000

Advance taxpayable = (100000/4)-10000 = 25000-10000= Rs. 15000

Due Date for payment of Advance Tax

AOP and Company

• • First quarter (July-September)                         25th September
  • Second quarter (October-December)              25th December
  • Third quarter (January-March)                         25th March
  • Fourth quarter (April-June)                              15th June

 

Individual

• • First quarter (July-September)                         15th September
  • Second quarter (October-December)              15th December
  • Third quarter (January-March)                         15th March
  • Fourth quarter (April-June)                               15th June

Advance tax from provincial sales tax registered person (Section 147A)

According to Section 147A of the Income Tax Ordinance, 2001, “Every
provincial sales tax registered person shall be liable to pay advance tax

• at the rate of three per cent of the turnover declared before the provincial revenue
  authority
•  monthly at the time when sales tax return is to be filed with the provincial revenue authority
• adjustable against advance tax payable for the quarter or taxpayable at the time of assessment
• refundable if cannot be adjusted

 Not appliacable to a person whose name appears in Active Tax Payer List (ATL) on 30th June

Advance Tax on Imports (Section 148)

According to Section 148 of the Income Tax Ordinance, 2001, “The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule in respect of goods classified in Parts I to III of the Twelfth Schedule”.

“Advance tax shall be collected in the same manner and at the same time as the customs-duty payable in respect of the import or, if the goods are exempt from customs-duty, at the time customs-duty would be payable if the goods were dutiable”.

The Customs-duty is paid on bill of entry.

Transitional Advance Tax

Transitional Advance Tax is paid on certain transactions/payments made by a taxpayer under Chapter Twelve of the Income Tax Ordinance, 2001 at the rates specified in respective Division of Part IV of First Schedule of Income Tax Ordinance, 2001:

Description	Section	Rate
Motor Vehicles Registration	231B	Division VII of Part IV of First Schedule
Brokerage and Commission	233	Division II of Part IV of First Schedule
Motor Vehicles Token	234	Division III of Part IV of First Schedule
Electricity Consumption	235	Division IV of Part IV of First Schedule
Telephone and Internet users	236	Division V of Part IV of First Schedule
Sale on Auction	236A	Division VIII of Part IV of First Schedule
Sale or Transfer of Immovable Property	236C	Division X of Part IV of First Schedule
Advance Tax on Foreign TV Plays and advertisements	236CA	Division XA of Part IV of First Schedule
Sales to distributors, dealers and wholesalers	236G	Division XIV of Part IV of First Schedule
Sales to retailers	236H	Division XV of Part IV of First Schedule
Purchase or Transfer of Immovable Property	236K	Division XVIII of Part IV of First Schedule
Persons remitting amounts abroad through credit or debit or prepaid cards	236Y	Division XXVII of Part IV of First Schedule

 

FAQs

Q.  What is advance income tax?

Ans.  Advance Income Tax is paid on during the year through quarterly payments under Section 147 before declaration of income, on imports under Section 148, on certain transactions under Chapter Twelve of the Income Tax Ordinance, 2001.

Q.  What is advance tax under Section 147?

Ans.  Under Section 147 of the Income Tax Ordinance, 2001, advance tax is paid by a taxpayer for the current year through quarterly payments  before the income is declared or assessed for current year on the basis of tax assessed in the previous year.

Q. What is advance tax rate under Section 236K of the Income Tax Ordinance, 2001?

Ans. Advance tax rate under Section 236K  of the Income Tax Ordinance, 2001 is give in Division XVIII of Part IV of First Schedule.

Q. Is advance tax refundable?

Ans. Advance tax is refundable if there is no tax payable on income actually declared or less than advance tax paid.

Q. Who should pay advance tax in Pakistan?

Ans.   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 –

• dividend income
• certain payments to non-residents-royalty, fee for offshore digital services, fee for money transfer
  operations, card network services, payment gateway services, interbank financial
  telecommunication services or fee for technical services;
• salary income;
• income chargeable to deduction of tax at source or advance payment of tax under  sections other than Section 147 of Income Tax Ordinance 2001
•  an individual where the individual’s latest assessed taxable income excluding above referred classes of income, is less than one million