If you are a taxpayer in Pakistan, you may have heard about advance tax. Advance tax is a type of tax that taxpayers pay in advance on a quarterly basis. It is a way for the government to collect tax revenue in advance, rather than waiting until the end of the tax year. In this article, we will provide a comprehensive guide to advance tax in Pakistan.
Who needs to pay advance tax?
Advance tax is payable by all entities who had to pay tax for the previous tax year. This includes companies and individuals who have a turnover of Rs. one million and above. Individuals who fall under this category are required to submit advance tax under section 147 of the income tax ordinance 2001.
How is advance tax calculated?
For the calculation of advance tax, the following formula is used:
(A*B/C)-D
Where A is the taxpayer’s turnover for the quarter, B is the tax assessed for the previous tax year, C is the turnover of the taxpayer for the previous tax year, and D is the tax already paid during that quarter.
When is advance tax due?
The due dates for filing of advance tax for individuals are the 15th day of the end of each quarter. For companies and Association of Persons AOPs, the due dates will be the 25th of the next month after the end of each quarter, except for the last quarter where the due date will be the 15th.
Therefore, the due dates for quarterly statements are as follows:
- 15th October for the July-September quarter
- 15th January for the October-December quarter
- 15th April for the January-March quarter
- 15th June for the April-June quarter
For corporate entities and AOPs, the due dates are slightly different:
- 25th October for the July-September quarter
- 25th January for the October-December quarter
- 25th April for the January-March quarter
- 15th June for the April-June quarter
What happens if advance tax is not paid?
If the advance tax is not paid on time, the taxpayer will be subject to penalties and interest. The penalty for late payment is 1.5% per month or a part of the month on the unpaid tax amount. In addition, interest will be charged on the unpaid tax amount at the rate of 1% per month or part of the month.
Conclusion
Advance tax is an important aspect of taxation in Pakistan. It is a way for the government to collect tax revenue in advance, rather than waiting until the end of the tax year. All entities who had to pay tax for the previous tax year, including companies and individuals who have a turnover of Rs. one million and above, are required to pay advance tax. The due dates for filing of advance tax vary depending on the type of entity. If the advance tax is not paid on time, the taxpayer will be subject to penalties and interest. Therefore, it is important to make sure that the advance tax is paid on time to avoid any penalties and interest.
