📈 IRD Issues Revised Guidance on Quarterly Income Tax Instalment Formula

The Inland Revenue Department (IRD) released Circular No. SEC/2026/E/06 (Revised) detailing rules for calculating quarterly income tax instalments under Section 90 of the Inland Revenue Act, effective from Y/A 2026/2027 onward. • Statutory Due Dates & Formula: • Due Dates: August 15 (1st), November 15 (2nd), February 15 (3rd), and May 15 of next year (4th). • Formula: (A − C) ÷ B • A: Gross tax payable of preceding year (before credits/reliefs). • B: Remaining instalments including current (4 for Aug, 3 for Nov, 2 for Feb, 1 for May). • C: Tax already paid/withheld (instalments, WHT/AIT, foreign tax credits under Sec 80). • Calculation Methods: • Method 1 (Standard Basis): Mandatory if preceding year had taxable income. • Example: Hardware shop owner (hardware) pays Rs. 67,500; liquor manufacturer (beverages/manufacturing) pays Rs. 185.52 Mn for 1st instalment. • Method 2 (Alternative Basis): For zero preceding taxable income, expected lower income, or new registrants (requires Attachment 1 or 2 filing by Aug 15). • Biscuit manufacturer (food manufacturing): Adjusted loss set-off leads to Rs. 35.55 Mn 1st instalment. • ICT/BPM software developer: Post-BOI exemption tax produces Rs. 1.65 Mn 1st instalment. • Method 3 (Safe Harbour): Case-by-case petition to IRD for exceptional market disruptions. • Key Carve-Outs & Compliance: • Employees: Fully exempt from instalments if income is solely from employment covered by APIT, or if passive rental/interest AIT fully covers liability. • Deadlines: Monthly Credit Schedule due by end of instalment month (e.g., Aug 31). Mid-year revisions allowed before Oct 31 (for Nov), Jan 31 (for Feb), and Apr 30 (for May).