Payment of advance tax U/S 147
Today our topic is an advance tax against which notices from the Federal Board of Revenue as per section “147 Intimation to Pay Advance Tax” or “Payment of Advance Tax U/C 147” are received by the taxpayers in compliance with quarterly reporting.
Section 147 is an advance tax payable that every person whose income is charged to tax for the latest tax year is required to make compliance with the section on the condition that the latest taxable income is more than one million.
The formula to calculate the advance tax liability is as per the following:
Formula = (In the case of Individual) (A/4)-B
- The latest tax assessed to the
- The tax paid or deducted at sources during the quarter.
Formula= In the case of association of persons (Partnership firm) or company) ( A X B/C)-D
- Taxpayer’s turnover for the respective
- The latest tax assessed to the taxpayer
- Turnover of the taxpayers for the latest tax.
- The tax paid or deducted at source during the quarter.
Exceptions to the following persons:
- The income of a person is less than one million.
- A person earning income from salary under section 149.
- A person earning income from dividends as per section 5 (tax on dividends).
- A Person earning income as per section 6 (tax on certain payments to non-residents).
- A Person earning income as per section 7 (tax on shipping and air transport income of non-resident person).
- Person earning income under a fixed or final tax regime.
Reporting dates are as follows in the case of an individual:
- Every September quarter covering Jul to Sep on or before the 15th day.
- Every December quarter covering Oct to Dec on or before the 15th day.
- Every March quarter covering Jan to Mar on or before the 15th day.
- Every June quarter covers April to June on or before the 15th day.
Reporting dates are as follows in the case of an association of persons or a company:
- Every September quarter covering Jul to Sep on or before the 25th day.
- Every December quarter covering Oct to Dec on or before the 25th day.
- Every March quarter covering Jan to Mar on or before the 25th day.
- Every June quarter covers April to June on or before the 15th day.
Withholding Tax deduction at source
Withholding tax is adjustable with tax payable while computing tax for a quarter, covering tax deductions under section 153 payment against goods or services, 148 import tax and 235 or 236 payment against utilities and any tax deduction which come under either normal tax or minimum tax regime.
Penalty in the case of non-compliance
The penalty is imposed due to non-compliance with section 147 as per section 205 (1B) that if the taxpayers will not pay and report tax quarterly under section 147 for at least 90% of the current fiscal year, the tax amount so paid is less than 90% of the total tax liability of the year, the difference will be collected along with default surcharge over and above the amount.
Conclusion
The overall conclusion is that it is expected that the taxpayers will pay and report tax quarterly at least 90% of the current fiscal year. There are few persons receiving notices who are not required to comply with because their income is not covered under such section or few receiving notices whose tax deductions become more than the tax payable of the quarter.
Recommendation
Taxpayers should comply with section 147 by replying to the notice with proper justification or attachments whether the income is taxable or not, especially in the case of companies under medium or Large taxpayers’ units or companies having high taxable income of more than one million of the prior year.
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