ByRental Income: If monthly rental income exceeds Rs. 25,000 or yearly income exceeds Rs. 300,000, advance tax is payable quarterly. The tax is calculated based on the slabs defined under the law.
Business Income: Any business operating in Pakistan must pay advance tax based on projected annual income.
Profit on Bank Deposits: If annual profit exceeds Rs. 5 million, additional tax beyond the deducted 15% may be payable. For profits below Rs. 5 million, deducted tax is considered final.
When Is Advance Tax Payable?
Quarterly Deadlines: Taxes are due on the 15th of each quarter (September, December, March, and June).
The tax is calculated as a fraction of the total annual liability.
What If the Income Is Already Taxed?
For income where tax is withheld at source (e.g., bank profits, dividends, mutual funds, RD accounts), no additional advance tax is required. You must:
Obtain a deduction certificate from the withholding entity (e.g., bank).
Respond to any FBR notice by attaching the certificate and explaining that the tax deducted is final.
Responding to FBR Notices
If you receive a notice under Section 147, you should:
Assess if you owe advance tax. This depends on whether the income type requires quarterly payments or has already been taxed.
Respond online via the IRIS portal, clarifying your income and attaching proof of any withheld tax (if applicable).
Also Read:
Exceptions to Advance Tax under Section 147 of Income Tax Ordinance
Did You Get Advance Tax Notice Under Section 147 of Income Tax?
Business Income
For overseas Pakistanis with business income in Pakistan, advance tax is mandatory. It is calculated based on prior year’s taxable income and adjusted for the current year’s projections.
Legal Basis
The obligations stem from Section 147 of the Income Tax Ordinance, 2001, which mandates advance tax payments for all income subject to taxation, excluding final tax regimes (e.g., withholding tax on bank profit, dividends, and RD accounts).
If the tax is minor or income falls under a final tax regime, responding to notices quarterly suffices.
For significant tax liabilities (e.g., high rental income, business income), adhere to deadlines to avoid penalties or interest.
Summary
- Pay Advance Tax: If you earn taxable income (e.g., rent > Rs. 25,000/month, business income).
- No Tax Due: For income taxed at source (e.g., bank profit, RD accounts), reply with evidence of tax deduction.
- Law Reference: Income Tax Ordinance, Section 147 outlines the advance tax mechanism.
