SL3 – CORPORATE TAXATION

STATUTORY PROVISIONS AND CASE LAW– 10%

STATUTORY PROVISIONS UNDER INLAND REVENUE ACT NO.24

OF 2017.

STATUTORY PROVISIONS – PART 03

METHODS AND TIME FOR PAYMENT

As per section 82 tax imposed under section 2 shall be payable under three of following
methods,

1. By Withholding Tax ( Section 86) – Discussed under Part 01

2. By Instalment Payments ( Section 90)
3. On Assessment – ( Section 93)

2. TAX PAYABLE BY INSTALLMENT

2.1 Payment of Tax by Quarterly Installment – Section 90
A person who is an “instalment payer” shall pay tax by quarterly instalments if he derives
or expects to derive assessable income during a year of assessment –

(a) from a business or investment; or

(b) from an employment where the employer is not required to withhold tax under
section 83.

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• An instalment payer shall pay instalments of tax

(a) in the case of a person whose year of assessment is a twelve month period ending on
the thirty first day of March, on or before the fifteenth day respectively of August,
November and February in that year of assessment and the fifteenth day of May of the
next succeeding year of assessment; or

(b) in any other case, on or before the fifteenth day after each three-month period
commencing at the beginning of each year of assessment and a final instalment on or
before the fifteenth day after the end of each year of assessment, unless it coincides with
the end of one of the three-month periods.

Practice Question – 01

What are the due dates of quarterly installment payment of a person whose year of
assessment ending on 31st December 2020?

2.2 Computation of Quarterly Installments – Section 90 (3)

Installment payment is to be calculated according to the following formula,
A —C
B
Where,

‘A’ is the current estimated tax payable for the year of assessment;

‘B’ is the number of instalments remaining for the year of assessment including the
current instalment; and

‘C’ is the sum of any –

(a) tax paid during the year of assessment (previous instalment) , but prior to the due
date for payment of the instalment,;

(b) WHT deducted from payments received by the person that are included in calculating
the person’s income for the year (but prior to the due date of payment) ; and

(c) tax paid in accordance with section 86 (3) or 86 (4) to the CGIR by a withholding agent
or the person as withholdee during the year but prior to the due date for payment of the

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instalment. (That is, WHT was not deducted at the point of payment, but WHT agent has
paid or the withholdee himself has paid it ).

2.3 Claiming of Tax Credit – Section 90 (4)

An instalment payer shall be entitled to a tax credit for a year of assessment in an amount
equal to the tax paid by way of instalment for the year.

2.4 Transitional Provisions – Section 203 (5)

For the purpose of calculating the amount of each instalment of tax payable by an
instalment payer under section 90 for the first year of assessment commencing on or after
1 April 2018, the instalment payer may assume that its current estimated tax payable for
that year of assessment is equal to the amount of tax that was payable by the instalment
payer in the previous year of assessment, increased by an uplift of five percent. A person
shall not be required to pay tax by quarterly instalments under section 90 where that
person had no tax payable in the previous year of assessment.

2.5 Tax Credits Prescribed by CGIR under estimated income tax payable under
quarterly installments.
Calculations of Final Installment of tax Payable,
Economic Service Charge (ESC) paid, Notional Tax Credit (NTC) brought forward and

advance payments made for the relevant installment can be deducted from the

installment of estimated tax payable, which was calculated in accordance with the

formula.

That is,

A-C

B Less (ESC + NTC + Advance Payment)

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Practice Question – 02

Good Designers (Pvt) Ltd is a company engaging in the business of providing modern
interior designing services to corporate customers. For the year of assessment 2020/21 as
per the provisional / estimated income tax computation following information available.

Income Tax Liability for the Y/A 2020/2021 ( Estimated based on available financial
information) Rs. 5,805,000

Notional Tax Credit Carried Forward Rs. 10,500/-

ESC Carried forward from 2018/2019 Rs. 105,000/-

Due to financial difficulties, the management of the company decided to pay tax amount
as advance income tax for the first quarter. Accordingly, paid Rs. 300,000/- and Rs.
250,000/- in the months of June and July 2020 with reference to 1st quarter.

Required – Based on above information compute income tax payable as quarterly

installments for the 1st quarter and 2nd quarter for the year of assessment 2020/21 with
due dates of payments.
2.6 Statement of Estimated Tax Payable – (Section 91)
Every installment payer shall file an estimate of tax payable for the year by the date for
payment of the first tax instalment

The above estimate should subject to any instructions by the Commissioner-General to

the contrary –

(a) be in the specified manner and form and state,

(i) the person’s assessable income for the year of assessment from each employment,
business and investment and the source of that income;

(ii) the person’s taxable income for the year and the tax payable, and

(iii) any other information that the CGIR may specify; and

(b) have attached to it any other information that the CGIR may specify.

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2.7 Original Estimate and Revised Estimate – Section 91 (5)

An instalment payer’s above estimate shall remain in force for the whole of the year of
assessment unless the person files a revised estimate with the CGIR.

A revised estimate filed as above shall be the person’s estimated tax payable for the year
of assessment, but only for the purposes of calculating instalments payable. The tax to be
paid for the year of assessment is the tax on the revise estimate of the taxpayer or estimate
of the CGIR as explained below.

In estimating tax payable for a year of assessment, a person may take into account a
foreign tax credit to be claimed. However, in doing so a person may take account of
foreign income tax only if the person has paid the tax or the person reasonably estimates
that the tax will be paid during the year.

2.8 Statement of Estimated Tax Payable Not Required – (Section 92)

The CGIR may specify by notice in writing that an instalment payer or class of instalment
payers is not required to submit an estimate.

Where an instalment payer is not required to submit an estimate as above, the CGIR shall,

(a) make an estimate of the person’s estimated tax payable for the year of assessment,
which may be based on the tax payable for the previous year of assessment with an uplift;
and

(b) serve on the instalment payer a written notice stating the Commissioner-General’s
estimate and the manner in which it is calculated.

Where the CGIR serves a notice as above, the estimated tax payable by the person for the
year of assessment shall be the amount estimated by the CGIR.

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3. TAX PAYABLE ON ASSESSMENT – SECTION 93

3.1 Return of Income– Section 93 (1)

Every person should file with the Commissioner-General not later than eight months
after the end of each year of assessment a return of income for the year.
3.2 Format of Return of Income – Section 93 (2)
A return should be in the manner and form specified by the Commissioner-General and
furnishing the following details: –

(a) (i) the person’s assessable income for the year from each employment, business
and investment and the source of that income;

(ii) the person’s taxable income for the year and the tax payable with respect to
that income;

(iii) any tax paid by the person for the year by withholding, instalment or
assessment for which a tax credit is available withholding credit or quarterly installment;

(iv) the amount of tax remaining to be paid for the year , and

(v) any other information that the Commissioner General may specify;

(b) have attached to it,

(i) any withholding certificates, and

(ii) any other information that the Commissioner General may specify.

3.3 Capital Gain Tax Return – Section 93 (3)

Every person with taxable income consisting of a gain from the realization of an
investment asset shall file with the Commissioner-General a capital gains tax return not
later than one month after that realization.

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3.4 Format of Capital Gain Tax Return – Section 93 (4)

A capital gains tax return of a person shall, subject to any instructions by the
Commissioner-General setting out the following: –

(i) the person’s assessable income consisting of the gain from the realisationof the
investment asset, including the calculation of that gain;

(ii) the person’s taxable income with respect to that gain and the tax payable on it

(iii) any tax paid by the person for the year by instalment attributable to the gain
for which a tax credit is available under section 90; and

(iv) any other information that the Commissioner General may specify.

3.5 Return of Income Not Required - Section 94 (1)

A return of income for a year of assessment shall not be required under section 93

From,

(a) a resident individual –

(i) who has no tax payable for the year - Person does not has tax on taxable income.

or

(ii) whose tax payable for the year relates exclusively to income from employment subject
to withholding under section 83; or

(b)a non-resident person who has no tax payable for the year.
3.5.1 Special Provisions - Section 94 (2) and (3)
However, even under above situations if the Commissioner- General may serve a notice
in writing on a person requiring the person to file a return such person shall comply
accordingly.

However, a person may elect to file a return even though the person is not required to,
where that person ceased an employment during the year.
Self Assessment – Section 95
A return of income or capital gains tax return filed under section 93 shall result in a self-
assessment.

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