Advance Tax Under Section 147: The Four Dates Businesses Keep Missing

Business tax · Section 147

Most taxpayers think of tax as an annual event. For businesses above a modest threshold, it is quarterly — and the first date of the year falls in September.

All Pakistan Taxes desk · 16 August 2026

Section 147 of the Income Tax Ordinance requires advance tax to be paid in four
instalments spread across the year, rather than settled in a single payment when the return
is filed. It catches a far wider group than most people expect: if your assessed tax
liability for the previous year exceeded Rs 100,000, you are almost certainly within scope.

That threshold pulls in businesses, associations of persons, and a substantial number of
individuals with business or freelance income who think of themselves as annual filers. For
them the first surprise is usually not the amount but the calendar.

The four dates

Three of the four instalments fall on the twenty-fifth. The June payment does not —
it is due on the fifteenth. That single inconsistency accounts for more missed payments than
any other feature of the regime, because taxpayers who have diarised three dates correctly
assume the fourth follows the same pattern.

The cost of paying late

A default surcharge runs for the period of delay, and it is calculated per instalment
rather than on the year as a whole. A September payment missed and settled the following June
accrues the surcharge across all nine months, not from the year end when the position is
finally squared up.

Advance tax is not a prepayment of next year’s liability. It is this year’s
liability, collected before the return is filed.

Calculating the instalment, and adjusting it

The default calculation takes your last assessed liability and divides it across four
quarters. That works well enough when trading is stable and badly when it is not, which is why
the Ordinance permits a taxpayer to file an estimate where the current year is running
materially below the previous one.

Where trading is running ahead of last year, paying on the old figure is permissible but
leaves a balance falling due at filing. Either way, the instalment is a starting position
rather than a fixed obligation, and treating it as immovable costs money in one direction or
the other.

Why overpaying is not the safe option

Businesses often default to overpaying on the assumption that any excess simply comes back.
It does, but not quickly. The money sits with FBR until the return is filed, the refund is
claimed and the claim is processed, and our guide to
checking refund
status exists precisely because that wait is routinely measured in months.

For a business with any working capital pressure, a realistic estimate filed on time is
better cash management than a generous overpayment reclaimed later.

A worked example

Suppose your assessed liability for the previous year came to Rs 400,000. The default
position is four instalments of Rs 100,000, payable on 25 September, 25 December, 25 March and
15 June.

Now suppose trading this year is running at roughly half the previous year’s level. Rather
than paying the full Rs 400,000 across the four quarters and reclaiming the excess after
filing, you file an estimate and pay closer to Rs 200,000. The final tax position is identical;
the difference is that Rs 200,000 remained available to the business for most of the year
instead of sitting in a refund queue.

Making the payment

Advance tax is paid by generating a payment slip and settling it through a bank or an
approved digital channel. Retain the challan for every instalment without exception — at
filing, those challans are what you set against the year’s liability, and a payment you cannot
evidence is, for practical purposes, a payment you did not make. Our guide to
paying FBR tax through
Easypaisa covers one of the more straightforward routes.

September is the pinch point

The 25 September instalment falls five days before the 30 September return deadline for
individuals and associations of persons. Two distinct obligations land in the same week, and
meeting one does nothing for the other: paying the instalment does not file your return, and
filing your return does not discharge the instalment.

If you are preparing the annual return alongside it, our
Tax Year 2026 filing
guide covers that process, while freelancers carrying business income should read
the freelancer filing
guide for how the two obligations interact.

A short checklist

• Establish whether last year’s assessed liability exceeded Rs 100,000. That is the trigger
  for the entire regime.
• Diary all four dates now, and set the June entry to the fifteenth rather than the
  twenty-fifth.
• If the current year is running well below the last, file an estimate instead of
  overpaying and waiting on a refund.
• Retain every challan. They are the evidence you set against the final liability.

Common questions