Statement of Estimated Income Tax Payable – Income Tax Calculation

Statement of Estimated Income Tax Payable – Income Tax Calculation

The article covers the following:

  1. What is a Statement of Estimated Income Tax Payable or SET?
  2. How do you estimate your payable tax amount?
  3. Who should submit a Statement of Estimated Income Tax Payable?
  4. When do you have to submit your SET?
  5. Due dates for quarterly payments
  6. How do you calculate your quarterly estimated income tax installment payments?
  7. Deductions and important points to remember
  8. Non-compliance and it’s penalties
  9. Submit your SET forms with Simplebooks!

If it’s time for you to submit your ‘Statement of Estimated Income Tax Payable’ or ‘SET’ again and you’re still struggling to understand the in’s and out’s of the whole process, here’s a comprehensive guide that’ll come in handy. 

Let’s start with the basics. 

What is a Statement of Estimated Income Tax Payable or SET? 

In a Statement of Estimated Income Tax Payable (SET), you basically estimate the total amount of tax you’ll have to pay for the next financial year (2020/2021).

You can estimate the total payable tax by first estimating the total profits you’ll make for the upcoming financial year. 

It’s important to remember that you ‘estimate’ these amounts. 

This is because you cannot know for certain the exact profits you’ll make within a financial year. 

Since you cannot know exact profits, you won’t know the exact tax you’ll have to pay on your profits. 

How do you estimate your payable tax amount?

Step 01: Make an estimate of your profits at the end of the 2020/20201 financial year.

Step 02 : Estimate how much tax you’ll have to pay for your estimated profit. 

After you make these estimates, you have to mention them on your Statement of Estimated Income Tax Payable form and submit it to the Commissioner General at the Inland Revenue Department. 

Who should submit a Statement of Estimated Income Tax Payable? 

If you’re an individual or a business that’s;

  1. Registered with the Department of Inland Revenue (IRD)

AND

  1. Has a Tax Identification Number (TIN) 

you have to submit a Statement of Estimated Income Tax Payable (SET). 

When do you have to submit your SET?

You have to submit this form on the 15th of August every year to the Commissioner General and make payments on your income tax on a quarterly basis. 

Remember, these quarterly income tax payments are made on your estimated profits and not your real profits. 

Due dates for quarterly payments


Here are the due dates for your quarterly payments: 

End of Quarter Payment Due Date
1st Quarter30.06.202015.08.2020
2nd Quarter 30.09.202015.11.2020
3rd Quarter 31.12.202015.02.2021
4th Quarter31.03.202115.05.2021
Final payment (2020/2021)30.09.2021

After you make your final quarterly payment on the 15th of May 2021, you’ll have to make one last final payment on or before the 30th of September 2021.

There are a couple of things you should remember when you’re making your final payment : 

  • You should only make your final payments (on or before 30th Sept 2021) after you’ve audited your finance records. 
  • This means that the final payment you make will not be based on your estimated profits, it will be based on your actual profits.  
  • If there were any differences between the estimated payable income tax and the actual income tax amount (based on your actual profits), you’ll have to pay the difference on or before the 30th of September 2021. 
  • After you’ve settled your final payments on the 30th of September 2021, you have to submit a formal document that shows your audited tax returns on the 30th of November 2021.

How do you calculate your quarterly estimated income tax installment payments?

If you don’t have a dedicated accountant or a financial service calculating your SET for you, and you’re doing it on your own; here’s how the payment amounts are calculated for each quarter :

Installment Payment =

Estimated tax payable – [Previous installment payments + AIT / WIT]    

  Remaining no. of installments

                                                   

We’ve defined these terms for you: 

  • Estimated tax payable – The tax amount that you think you’ll have to pay for the upcoming financial year (2020/2021). This is calculated based on the estimated tax amount you’ll have to pay for your estimated profit.
  • Previous installment payments – If you’ve made any advanced quarterly income tax payments up until now, you can deduct it. For example; if you’ve made tax payments in June or February, you can deduct that amount for your next quarterly installment.
  • Advanced Income Tax (AIT)  and Withholding tax (WHT) –  If you’ve paid any tax payments in advance, you can deduct that.   

Deductions and important points to remember 


When you’re calculating the upcoming quarterly installment payments, there are a few things to remember. 

  1. Deductions 

There’s two types of deductions you could be entitled to: 

  1. Personal deductions of Rs 3,000,000 and Expenditure deductions up to Rs 1,200,000.
  2. Company deductions  – If you have incurred expenses to generate profit for the business (ex: travel, rent, utilities), you can deduct these amounts. 

If you’re paying as a registered individual, you’ll be entitled to personal deductions and expenditure deductions. Expenditure deductions are however subject to certain restrictions. If you’re paying as a registered company, you’ll be entitled to company deductions. 

2. Remember

  • The estimated tax amount (SET) that you calculate will be relevant for the entire upcoming financial year.
  • However, if your estimated tax amount for the next financial year either increases or decreases suddenly and you want to change the initial estimated tax amount you’ve filed, you’ll have to submit a revised SET to the Commissioner General with the new tax estimates.  
  • If you’ve given a tax estimate that is lower than the actual amount of tax that you have to pay for the financial year, you will have to submit a cause for the difference to the Commissioner General in your revised SET forms.

Non-compliance and it’s penalties

If you don’t follow the correct procedures relevant to the Statement of Estimated Tax Income Payable (SET), you will be considered as ‘non-compliant’ by the government and penalized accordingly. 

There’s two scenarios where you’ll be considered as non-compliant;

  1. Turning in the Statement of Estimated Income Tax Payable (SET) form late or submitting false and misleading SET forms  
  1. Evading quarterly installment payments 
  • This is when you’ve filed the SET forms to the Commissioner General but failed to make quarterly payments (in full) on or before the due date. 

Let’s take a look at the penalties for each offense. 

  1. Turning in the Statement of Estimated Income Tax Payable (SET) form late or submitting false and misleading SET forms
  • If you fail to submit your SET forms on time, you’ll be required to either:
  1. Pay 5% of the tax amount you owe + 1% for each additional month you don’t file the SET forms 

OR

  1. 50,000 + a further Rs 10,000 for each additional month you don’t file your SET forms. 
  • From the two penalties we’ve mentioned about (a and b), the penalty that requires you to pay the most amount of money will be the penalty you get.
  • However, the maximum penalty amount will be limited to Rs 400,000.
  1. Non-compliant on payments 
  • If you fail to pay your quarterly installments either fully or partially within 14 days of its due date, you’ll have to pay a penalty equal to 10% of the due amount you didn’t pay. 
  • If you default on your installments either fully or partially, you’ll be charged 1.5% interest per month.

Submit your SET forms with Simplebooks!

Hey, we’re Simplebooks – a registered tax advisor. 

This means that Simplebooks is capable of calculating and submitting your SET forms for you. 

If you need help submitting your SET forms by the 15th of August this year, you can contact us here.

You can also directly call our offices at +94-114060909 or +94-0114365409

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