Does a professional have to pay advance tax in quarterly installments on practice income?

An employee’s tax is taken out of every salary payment. A self-employed doctor or advocate has no employer doing that, so the Income Tax Ordinance, 2001 uses advance tax in section 147 to collect tax during the year instead of all at once when the return is filed.

What does the law say?

Who is covered. Section 147(1) makes every taxpayer whose income was charged to tax for the latest tax year liable to pay advance tax, leaving out three kinds of income:

• income charged under the separate charging provisions listed in clause (b);
• income subject to deduction of tax at source from salary (clause (c)); and
• income from which tax was collected or deducted at source and for which no tax credit is allowed (clause (d)).

The Rs. one million threshold. Section 147(2) says the section does not apply to an individual whose latest assessed taxable income, excluding those three kinds of income, is less than Rs. one million.

The formula for individuals. Section 147(4B) applies to an individual with latest assessed income of Rs. one million or more. The advance tax for each quarter is:

(A / 4) minus B

• A is the tax assessed for the latest tax year.
• B is the tax paid in the quarter for which a tax credit is allowed, other than tax deducted from salary.

Due dates. Section 147(5) makes an individual’s advance tax payable by:

Quarter	Due on or before
September quarter	15 September
December quarter	15 December
March quarter	15 March
June quarter	15 June

Credit and refund. Advance tax paid is a tax credit against the tax due for the year under section 147(8), and any part that cannot be used is refunded under section 147(10).

How does it relate to the due date in section 137?

Section 137(1) makes the tax payable on taxable income for a tax year due on the due date for furnishing the return for that year. Advance tax is a set of installments paid before that date and credited against the final figure. If the four installments fall short of the tax on the return, the balance is due with the return. The proviso to section 137(2) confirms that advance tax due under section 147 is payable on the dates in section 147(5), not on the return date. Section 147(7) treats unpaid advance tax as if it were tax due under an assessment order, which brings in the Ordinance’s recovery provisions.

Worked example (illustrative figures)

Kamran Shah is an advocate in Peshawar with no salary. His return for tax year 2026 was assessed, and his made-up figures are:

• latest assessed taxable income (tax year 2026): Rs. 3,000,000, all from practice;
• tax assessed for tax year 2026 (A): Rs. 590,000.

1. Is he covered? Rs. 3,000,000 is above Rs. one million, so section 147(2) does not exclude him.
2. Quarterly base: Rs. 590,000 / 4 = Rs. 147,500.
3. September quarter 2026: clients withheld Rs. 60,000 from his fees during the quarter, and the example assumes that tax is allowed as a tax credit. B = Rs. 60,000. Advance tax = Rs. 147,500 minus Rs. 60,000 = Rs. 87,500, due by 15 September 2026.
4. December quarter 2026: no tax was withheld. B = 0. Advance tax = Rs. 147,500, due by 15 December 2026.

When he files his tax year 2027 return, all advance tax paid and the creditable withholding are set against the tax on his actual tax year 2027 income. Whether tax withheld from a professional’s fees counts as a creditable payment or as a minimum tax is covered on a separate page in this category.

What if …?

What if I am a salaried doctor with a private clinic? Salary taxed at source is excluded when testing the Rs. one million threshold, and tax deducted from salary is not part of B. Only the clinic income, and other non-excluded income, is counted.

What if my latest assessed income was below Rs. one million? Section 147(2) takes an individual out of the section. The tax for the year is then due with the return under section 137(1).

What if I expect a bad year? Section 147(6) allows an estimate of lower tax to be filed before the last installment is due, with the reduced amount paid in equal installments on the remaining dates. Section 147(6B) requires the estimate to include turnover for completed quarters, estimated turnover for the rest, evidence of expenses and tax payments, and a computation of estimated taxable income.

Common mistakes

• Counting salary toward the Rs. one million test. Section 147(2) excludes income subject to deduction at source from salary.
• Using the company dates. Section 147(5A) sets 25 September, 25 December, 25 March and 15 June for companies and associations of persons. Individuals use the 15th of the month in section 147(5).
• Treating advance tax as extra tax. Section 147(8) credits it against the year’s liability, and section 147(10) refunds any excess.
• Ignoring an unpaid installment. Section 147(7) makes it recoverable like tax under an assessment order.

What to check in the official text

Read section 147, especially sub-sections (1), (2), (4B), (5), (6) and (7), and section 137(1) and the proviso to section 137(2). Section 147(7A) lets the Board prescribe how estimates are furnished through IRIS; any such procedure is outside this corpus.