ByPurpose of Section 147:
- To collect advance tax from individuals and companies during the financial year, instead of waiting for the final assessment after the year ends.
- This helps ensure timely collection of taxes and prevents revenue gaps.
Key aspects of advance tax under Section 147:
- Individuals and companies whose estimated tax liability for the year exceeds a certain threshold are required to pay advance tax in installments throughout the year.
- The amount of advance tax is calculated based on a formula considering your previous income, current income, and potential tax deductions.
- The FBR issues advance tax notices specifying the amount and deadlines for each installment.
- Failure to pay advance tax or complying with the notice can result in penalties and interest charges.
Responding to a Section 147 notice:
- If you receive a Section 147 notice, it’s crucial to understand the amount due and deadlines.
- You can either pay the advance tax according to the notice or file an estimate of your income for the year.
- If you file an estimate, the FBR may revise the advance tax amount based on their assessment.
- You can appeal the revised amount if you disagree.
Apply the advance tax formula:
- Once you have your taxable income and tax bracket rate, use the following formula to calculate your advance tax liability:
Advance Tax = (Taxable Income * Tax Rate) / Number of Installments
Number of Installments: There are four advance tax installments due throughout the year:
- 25th September
- 25th December
- 25th March
- 15th June
