Demystifying Section 147: Calculate Your Advance Tax with Ease

Purpose 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

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