Do I have to pay quarterly advance tax under section 147, and how is it calculated?

An individual whose latest assessed income, other than salary and final-tax income, is one million rupees or more pays income tax in four instalments during the year, not only when the return is filed. Section 147 of the Income Tax Ordinance, 2001 sets who pays, the formula and the due dates. Section 205 adds default surcharge for paying late.

What does the law say?

Who pays. Section 147(1) applies to every taxpayer whose income was charged to tax for the latest tax year. It leaves out certain income taxed separately under Chapter II, salary taxed at source under section 149, and income on which final tax was collected or deducted with no credit under section 168(3). Section 147(2) then says the section does not apply to an individual whose latest assessed taxable income, leaving out those categories, is less than one million rupees.

How much. Section 147(4B) applies to an individual with latest assessed income of one million rupees or more. Each quarter’s advance tax is:

(A / 4) - B

• A is the tax assessed to the taxpayer for the latest tax year. An explanation to section 147(4B) widens “tax assessed” to include one other liability, so read it with your assessment.
• B is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax deducted under section 149.

When. Section 147(5) sets the due dates for an individual:

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

For tax year 2027 (1 July 2026 to 30 June 2027), those dates are 15 September 2026, 15 December 2026, 15 March 2027 and 15 June 2027.

How does it work in practice?

Section 147 does not depend on receiving a demand. Section 147(7) says the Ordinance applies to advance tax due as if the amount were tax due under an assessment order.

The “B” part matters for a business. Section 168(2) allows a credit for tax collected from you under Division II or deducted from payments to you under Division III, or under Chapter XII. Where such tax is creditable, what was collected or deducted in a quarter reduces that quarter’s instalment. Tax that is final under section 168(3) is not creditable, so it does not count in B.

At the end of the year, section 147(8) allows the advance tax paid as a credit against the tax due for that year. Section 4(3) applies credits under sections 147 and 168 after foreign tax credits and Part X credits.

Worked example (illustrative figures)

Rukhsana owns a crockery shop in Multan. Her latest assessed tax year is tax year 2026. Her made-up figures:

• Assessed taxable income (all business): Rs. 3,200,000, which is not less than Rs. 1,000,000, so section 147(4B) applies.
• Tax assessed for that year (A): Rs. 480,000.
• Creditable tax collected from her during July to September 2026: Rs. 18,000.

September quarter instalment:

1. A / 4 = Rs. 480,000 / 4 = Rs. 120,000.
2. B = Rs. 18,000.
3. Instalment = Rs. 120,000 minus Rs. 18,000 = Rs. 102,000, due by 15 September 2026.

If she pays the Rs. 102,000 thirty days late, section 205(1A) charges default surcharge at 12 per cent per annum on the unpaid amount:

4. Rs. 102,000 × 12% = Rs. 12,240 for a full year.
5. Rs. 12,240 × 30 / 365 = about Rs. 1,006.

Section 205(1A) does not state a day-count method. The daily split in step 5 is an illustration only.

What if …?

What if I expect lower tax this year? Section 147(6) lets a taxpayer who estimates, before the last instalment is due, that tax payable for the year is likely to be less furnish an estimate to the Commissioner and pay the estimated amount, less what is already paid, in equal instalments on the remaining dates. Section 147(6B) requires the estimate to include turnover for completed and remaining quarters, evidence of expenses, deductions, tax payments and credits, and a computation of estimated taxable income. The Commissioner may reject an estimate that lacks these details after a hearing, and then the formula applies.

What if my estimate turns out too low? Section 205(1B) applies where a taxpayer fails to pay tax under section 147(4A) or (6), or pays less than ninety per cent of the tax chargeable for the year. The default surcharge is 12 per cent per annum on the tax chargeable or on the shortfall below ninety per cent. It runs from 1 April in that year to the date of assessment or 30 June of the financial year next following, whichever is earlier.

What if my only income is salary? Salary taxed under section 149 is left out of section 147(1) and of the one million rupee test.

Common mistakes

• Using this year’s expected profit as A. In section 147(4B), A is tax assessed for the latest tax year, not an estimate. An estimate replaces the formula only through section 147(6).
• Subtracting salary deductions as B. Tax deducted under section 149 is expressly excluded from B.
• Using the company dates. Section 147(5A) gives associations of persons and companies the 25th of September, December and March. Individuals use the 15th under section 147(5).
• Treating default surcharge as waived by paying with the return. Under section 205(1A) the surcharge runs until payment or the due date of the return, whichever is earlier.

What to check in the official text

Read section 147 in full, especially sub-sections (1), (2), (4B), (5), (6), (6B), (7) and (8). Read section 205(1A) and (1B) for default surcharge, and section 168(3) for the list of final taxes that do not count toward B. Section 147(7A) lets the Board prescribe how estimates are furnished through Iris or another automated system. That procedure is not in this corpus.