Amendments related to Advance Tax under section 147

Amendments related to Advance Tax under section 147 [Sections 137 & 147]

Amendments related to Advance Tax under section 147: Advance tax is due on the dates specified in sub-sections (5), (5A) and (5B) of section 147. In case of non-payment, sub-section (7) states that the provisions of the Ordinance shall apply to any advance tax due under section 147 as if the amount due were tax due under an assessment order.

In this regard, advance tax was due on the dates specified for in sub-sections (5), (5A) or (5B).

However, sub-section (2) of section 137 provided that where any tax was payable under an assessment order, a notice in the prescribed form shall be served upon the taxpayer specifying the amount payable and thereupon the sum so specified was to be paid within thirty days from the date of service of the notice

In order to ensure that advance tax is tax due on the dates mentioned in section 147, a proviso has been added in sub-section (2) of section 137 providing that the due date for payment of tax payable under sub-section (7) of section 147 shall be the date specified in sub-sections (5) or (5A) or the first proviso to sub-section (5B) of section 147.

Secondly, in the case of companies and association of persons, advance tax due for a quarter is computed as per formula given in sub-section (4) of section 147.

In cases where taxpayers fail to provide turnover for the quarter or turnover for the quarter is not known on the due date for payment of advance tax, it was not possible to compute advance tax liability under sub-section (4) on the due date for payment of advance tax.

Through the Finance Act, 2018, a proviso has been added in component ‘A’ of sub-section (4) of section 147 providing that where a taxpayer fails to provide turnover for the quarter or the turnover for the quarter is not known, the turnover for the quarter shall be taken to be one-fourth of 110 percent of the turnover for the latest tax year for which a return has been filed.

Thirdly, as per sub-section (6) of section 147, taxpayers can file lower estimate of advance tax at any time before the last installment is due. However, prior to the Finance Act, 2018, there was neither requirement of giving reason for lower estimate nor any details or documentary evidence was required.

Through the Finance Act, 2018, two provisos have been added in sub-section (6) providing that an estimate of the amount of tax payable shall contain turnover for the completed quarters for the relevant tax year, estimated turnover of the remaining quarters along with reasons for any decline in estimated turnover, documentary evidence of estimated expenses or deductions which may result in lower payment of advance tax and the computation of the estimated taxable income of the relevant tax year.

The Commissioner has been empowered to reject the estimate after providing an opportunity of being heard to the taxpayer if the Commissioner is not satisfied with documentary evidence provided or where an estimate of tax payable is not accompanied by details mentioned above.

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