CFAP 5: Tax Planning and Practices

ADVANCE TAX PAID BY

THE TAXPAYER
Compiled by: Murtaza Quaid, ACA
Advance Tax paid by the Taxpayer

In this Part:
 Quarterly Advance Tax [Section 147]

 Advance Tax from Provincial Sales Tax

Registered Person [Section 147A]
 Quarterly Advance Tax [Section 147]

Person liable to pay quarterly advance tax

 Every taxpayer whose income was charged to tax

for the latest tax year other than
a) Income chargeable to tax under sections 5, 6 and
7[i.e. FTR - STR];
b) Income subject to deduction of tax at source
under section 149 [i.e. Salary]; and
c) Income from which tax has been
collected/deducted and for which no tax credit is
allowed u/s 168 [i.e. FTR - PTR],
Individual whose latest assessed taxable
income excluding income referred to in
clauses (a), (b), and (c) above is less than
Rs. 1,000,000 is not required to pay quarterly
advance tax.
Company and AOPs are required to pay
quarterly advance tax in the absence of last
assessed income or declared turnover also.
[Sec. 147(6A)]
 Quarterly Advance Tax [Section 147]

Timeline to pay Quarterly advance tax

Individual AOP / Company

Advance tax is payable by an individual to the Advance tax shall be payable by an AOP or
Commissioner in respect of : company to the Commissioner in respect of:
 September quarter, on or before 15th Sep;  September quarter, on or before 25th Sep;
 December quarter, on or before 15th Dec;  December quarter, on or before 25th Dec;
 March quarter, on or before 15th Mar; and  March quarter, on or before 25th Mar; and
 June quarter, on or before 15th Jun.  June quarter, on or before 15th Jun.
 Quarterly Advance Tax [Section 147]

Calculation of Quarterly Advance Tax – Company / AOP

Taxpayer’s Tax assessed for

Quarterly Advance Tax = Turnover for x the latest tax year _ Tax paid in the quarter
for which a tax credit is
the Quarter Taxpayer‘s turnover
allowed u/s 168.
for the latest tax year
 Where the taxpayer fails to provide turnover or turnover for the quarter is not known, it shall be taken to
be 1/4th of 120% of the turnover of the latest tax year for which a return has been filed.
 Explanation - For removal of doubt it is clarified that tax assessed includes tax under
 Section 113 (Minimum tax);
 Section 113C (Alternative corporate tax); and
 Section 4C (Super Tax on High Earning Persons)

Calculation of Quarterly Advance Tax – Individual

Tax assessed for

_ Tax paid in the quarter for which a tax credit is
Quarterly Advance Tax = the latest tax year allowed u/s 168, other than tax deducted u/s 149
4
 Explanation - For removal of doubt it is clarified that tax assessed includes tax liability under section 4C
(Super Tax on High Earning Persons)
 Quarterly Advance Tax [Section 147]

Estimation of Quarterly advance tax – Mandatory Estimation for AOP / Company

 Any AOP / Company (including banking company) who is required to make payment of
advance tax as per formula, shall estimate the tax payable for the relevant tax year, at any
time before the 2nd installment is due.
 In case the tax payable is likely to be more than the amount that the taxpayer is required to
pay as quarterly advance tax calculated as per above formula, the taxpayer shall
 furnish to the Commissioner on or before the due date of the second quarter, an estimate
of the amount of tax payable by the taxpayer and
 thereafter pay 50% of such amount by the due date of the second quarter of the tax year
after making adjustment for the amount, if any, already paid in 1st quarter.
 The remaining 50% of the estimate shall be paid after the 2nd quarter in two equal
installments payable by the due date of the 3rd and 4th quarter of the tax year.
 Tax liability under section113 (Turnover Tax), section 113C
(Alternative Corporate Tax) and section 4C (Super Tax on
High Earning Persons) shall also be taken into account
while working out payment of quarterly advance tax
liability.
 Quarterly Advance Tax [Section 147]

Estimation of Quarterly advance tax – Optional Estimation for Ind. /AOP / Co.
 If any taxpayer who is required to make payment of advance tax estimates at any time before the last
installment is due, that the tax payable by him for the relevant tax year is likely to be less than the amount
he is required to pay as quarterly advance tax calculated as per above formula, the taxpayer may furnish to
the Commissioner an estimate of the amount of the tax payable by him, and thereafter pay such estimated
amount, as reduced by the amount, if any, already paid as quarterly advance tax, in equal installments on
such dates as have not expired.
 An estimate of the amount of tax payable shall contain
i. Turnover for the completed quarters of the relevant tax year;
ii. Estimated turnover of the remaining quarters along with reasons for any decline in estimated turnover;
iii. Documentary / supporting evidence of estimated expenses or deductions which may result in lower
payment of advance tax;
iv. Evidence of tax payments and tax credits; and
v. Computation of the estimated taxable income
 However,
 if the CIR is not satisfied with the documentary evidence
provided or
 where an estimate of the amount of tax payable is not
accompanied by details mentioned above,
the CIR may reject the estimate after providing an opportunity
of being heard to the taxpayer and the taxpayer shall pay
advance tax according to the above formula.
 Quarterly Advance Tax [Section 147]

Estimation of Quarterly advance tax

Mandatory Estimation Optional Estimation

For AOP / Company For Individual / AOP / Company

Deadline – At any time before 2nd installment is due Deadline – At any time before last installment is due

IF Estimated tax liability > Advance tax as per formula, IF Estimated tax liability < Advance tax as per formula,
Obligation to follow estimate Option to follow estimate
 Quarterly Advance Tax [Section 147]

Quarterly advance tax in case of first year of taxability

Where the taxpayer is a company or an AOP,

advance tax shall be payable by it in the
absence of last assessed income or declared
turnover also. The taxpayer shall estimate the
amount of advance tax payable on the basis of
quarterly turnover and thereafter pay such
amount after,
 taking into account tax payable under
sections 113 and 113C; and
 making adjustment for the amount (if any)
already paid.
 Quarterly Advance Tax [Section 147]

Quarterly Advance Tax for Builders / Developers

 Every person deriving income from the business of:

i. construction and disposal of residential, commercial or other buildings; or
ii. development and sale of residential, commercial or other plots for itself or otherwise,
shall be liable to pay adjustable advance tax on Project-by-Project basis, as may be prescribed,
for the tax year as per the rates specified in Part IIB of the First Schedule in four equal
installments.
 Quarterly Advance Tax [Section 147]

Treatment of quarterly advance tax paid

 A taxpayer who has paid quarterly

advance tax for a tax year shall be allowed
a tax credit for that tax in computing the
tax due by the taxpayer.
 A tax credit or part of a tax credit for a tax
year that is not able to be credited as
above for the year shall be refunded to the
taxpayer.
 The provisions of ITO-2001 shall apply to
quarterly advance tax due as if the amount
due were tax due under an assessment
order.
 Quarterly Advance Tax [Section 147]

Default surcharge [Section 205]

Such shall be liable to pay default surcharge on the amount of tax

unpaid for the period
 commencing on the date on which it was due and
IF person fails to pay advance
tax u/s 147  ending on earlier of
- the date on which it was paid or
- date on which the return of income for the relevant tax year
was due,

Such person shall be liable to pay default surcharge on the following

 Taxpayer fails to pay amount for the period of days (to be discussed in next slide);
quarterly advance tax on
estimated basis or Actual tax liability for the relevant tax year XXX
 the tax so paid is less than 90% of actual tax liability XXX
90% of the tax chargeable Less. WHT Tax and advance tax paid (XXX)
for the relevant tax year,
Shortfall – Amount subject to default surcharge XXX

Default Surcharge would be worked out at higher of: KIBOR means Karachi Inter Bank Offered Rate
 12% per annum; or prevalent on the first day of each quarter of the
 KIBOR plus 3% per annum financial year.
 Quarterly Advance Tax [Section 147]

Default surcharge [Section 205]

 Taxpayer fails to pay quarterly advance tax on estimated basis or

 the tax so paid is less than 90% of the tax chargeable for the relevant tax year,

Period of Default

In case of normal tax year In case of special tax year

 from 1st day of 4th quarter of special tax year

 from 1st April in that year
 to the earlier of
 to the earlier of
- date on which assessment is made or
- date on which assessment is made or
- the last day of special tax year, whichever is
- 30th June of the next following financial year
earlier.
 Advance Tax from Provincial Sales Tax Registered Person
[Section 147A]
 Every provincial sales tax registered person shall be liable to pay adjustable advance tax
@ 3% of the turnover declared before provincial revenue authority, on monthly basis
at the time when sales tax return is to be filed with the provincial revenue authority.
 Advance tax paid as above may be taken into account while
working out advance tax payable under section 147.
 A taxpayer having paid advance tax shall be allowed a tax credit
for that tax in computing the tax due by the taxpayer on the
taxable income for the year.
 Unutilized tax credit shall be refunded to the taxpayer.
 Advance tax shall not be payable by a person whose name was appearing
in the active taxpayers' list (ATL) on 30th June of the previous tax year.

Explanation – Circular No. 7 of 2016 dated 27th July 2016

If a person’s name is not appearing in the active taxpayers’ list (ATL) on 30th June 2016, he shall
be liable to pay monthly advance tax under section 147A up to June 2017 irrespective of the fact
that he files income tax return subsequently before 30th June 2017 for inclusion of his name in
ATL.