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Procedure for advance tax payment clarified

ISLAMABAD (May 26 2004): The Central Board of Revenue (CBR) has announced procedure for the payment of advance tax in line with the Universal Self Assessment Scheme (USAS). The CBR on Tuesday issued income tax circular Number 2 of 2004 for clarifying advance tax payment and rescinded circular number 4 of 1979.

The CBR has issued the circular on queries of the private sector seeking clarifications as to what would be the tax turnover ratio for payment of advance tax for each quarter under section 147 of the Income Tax Ordinance, 2001.

Section 147 gives details about the period of advance tax payment including formula for the computation of advance tax, while section 148 permits collector of customs to collect advance tax from every importer on the value of the goods at the specified rates.

Under the new instructions, the tax – turnover ratio for each quarter would be the one, which existed prior to the prescribed date of payment of advance tax for the relevant quarter.

The CBR has examined the issue in the light of instructions contained in CBR's Circular No 4 of 1979 of August 23, 1979.

These instructions envisaged that advance tax shall be payable on the basis of latest assessment completed up to September 15 and this basis shall not change throughout the income year on account of completion of an assessment of a later year thereafter.

The provision of sub-section (4) of section 147 provides a formula for computation of the amount of advance tax to be paid for a quarter. The tax -turnover ratio is to be determined on the basis of assessment of the latest tax year.

The introduction of Universal Self-Assessment Scheme (USAS) coupled with the legal provisions that assessment would be treated to have been made on the date the return is filed and the fact that assessment so completed or assessment of earlier tax year may be amended during the currency of the tax year have rendered the instructions contained in para 13(b) of Circular No 4 of 1979 as redundant.

Accordingly, instructions of the said para no more applicable are hereby rescinded.

It is clarified that the tax – turnover ratio for each quarter would be the one which exists prior to the prescribed date of payment of advance tax for the relevant quarter.

The CBR has also specified that in case of taxpayers having special income year, the credit for payment of advance tax shall be allowed pertaining to quarters falling within such income year eg in case of a company closing its accounts on December 31, 2004, the credit of advance tax shall be allowed for tax year 2005 in respect of advance tax paid for the quarters ending March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004.

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