Does a partnership firm have to pay advance tax in quarterly instalments?

A partnership firm pays part of its income tax during the year, in four quarterly instalments, rather than all of it with the return. The amount is linked to the firm’s turnover and the tax assessed for its latest year. The firm can pay more or less than the formula gives by filing its own estimate, within limits.

What does the law say?

Who pays. Section 147(1) makes a taxpayer whose income was charged to tax for the latest tax year liable to pay advance tax, leaving out certain income such as salary taxed at source and income on which tax was withheld or collected without a tax credit. Section 147(2) excuses individuals whose latest assessed taxable income is under Rs. 1 million. That exemption is for individuals only: the words “or association of persons” were omitted from it by the Finance Act, 2010.

The formula. Section 147(4) says that where the taxpayer is an association of persons or a company, the advance tax for a quarter is:

(A x B / C) minus D

Letter	Meaning in section 147(4)
A	The taxpayer’s turnover for the quarter
B	The tax assessed to the taxpayer for the latest tax year
C	The taxpayer’s turnover for the latest tax year
D	The tax paid in the quarter for which a tax credit is allowed under the Ordinance

An Explanation says “tax assessed” includes tax under sections 4C (super tax), 113 (minimum tax) and 113C (alternative corporate tax, which by its terms applies to companies). Section 147(4AA) says liability under those sections is also taken into account when working out advance tax.

If the firm does not provide its turnover, or the quarter’s turnover is not known, a proviso to section 147(4) takes it as one-fourth of 120% of the turnover of the latest tax year for which a return has been filed.

The due dates. Section 147(5A) says an association of persons or a company pays:

Quarter	Due on or before
September quarter	25 September
December quarter	25 December
March quarter	25 March
June quarter	15 June

How does it work in practice?

New firms. Section 147(6A) says an AOP must pay advance tax even when it has no last assessed income or declared turnover. It estimates the amount on the basis of its quarterly turnover, takes into account tax payable under sections 113 and 113C, and adjusts anything already paid.

Estimating higher. Under section 147(4A), a taxpayer paying under sub-section (4) must estimate its tax for the year before the second instalment is due. If the tax is likely to be more than the formula gives, it files the estimate by the second quarter’s due date, pays 50% of the estimate (after adjusting what it has paid) by that date, and pays the other 50% in two equal instalments by the third and fourth quarter due dates.

Estimating lower. Section 147(6) lets a taxpayer that expects to owe less file an estimate before the last instalment is due and pay the reduced amount in equal instalments on the remaining dates. Section 147(6B) says the estimate must contain turnover for completed quarters, estimated turnover for the rest, supporting evidence of expenses, deductions, tax payments and credits, and a computation of estimated taxable income. The Commissioner may reject it after giving an opportunity of being heard, and the formula then applies.

Credit. Section 147(8) allows the advance tax paid as a tax credit against the firm’s tax for the year, and section 147(10) provides for a refund of any credit that cannot be used.

Worked example (illustrative figures)

Malik Traders, a partnership in Multan, had turnover of Rs. 80,000,000 in tax year 2026 and tax assessed of Rs. 1,600,000. In the September 2026 quarter its turnover is Rs. 22,000,000, and Rs. 150,000 of tax was withheld from it at source in that quarter with a tax credit allowed.

1. B / C = Rs. 1,600,000 / Rs. 80,000,000 = 0.02.
2. A x B / C = Rs. 22,000,000 x 0.02 = Rs. 440,000.
3. Minus D: Rs. 440,000 minus Rs. 150,000 = Rs. 290,000.
4. Due on or before 25 September 2026.

If the firm did not provide its quarterly turnover, the proviso would take A as one-fourth of 120% of Rs. 80,000,000:

1. 120% of Rs. 80,000,000 = Rs. 96,000,000.
2. One-fourth = Rs. 24,000,000.
3. Rs. 24,000,000 x 0.02 = Rs. 480,000, minus Rs. 150,000 = Rs. 330,000.

What if the firm pays late or too little?

Section 205(1A) makes a person who fails to pay advance tax under section 147 liable for default surcharge at 12% per annum on the unpaid amount, from the due date until it is paid or until the return for the year is due, whichever is earlier.

Section 205(1B) adds a separate charge where a taxpayer fails to pay tax under section 147(4A) or (6), or pays less than 90% of the tax chargeable for the year: default surcharge at 12% per annum on the shortfall, counted from 1 April of that year.

Common mistakes

• Using the individual dates. Section 147(5) sets the 15th of September, December, March and June for individuals. A firm follows section 147(5A), where three of the four dates are the 25th.
• Relying on the Rs. 1 million threshold. It is in section 147(2) and covers only individuals.
• Leaving out minimum tax or super tax. The Explanation and sub-section (4AA) bring tax under sections 4C and 113 into the calculation.
• Waiting for the first return. Section 147(6A) requires a new AOP to estimate and pay from its first quarter.

What to check in the official text

Read section 147 in full, especially sub-sections (1), (2), (4), (4A), (4AA), (5A), (6), (6A) and (6B). Read section 205(1A) and (1B) on default surcharge. Section 147(7A) lets the Board prescribe how estimates are filed through Iris or another automated system; those procedures are outside this corpus.