Provisional Assessment

A provisional assessment is a preliminary tax assessment conducted before a final assessment is made. It is typically based on estimated income, expenses, or tax figures from previous years and serves as a temporary measure until accurate data is available. Key Features Preliminary Nature Conducted before finalizing the actual tax liability. Provides taxpayers and authorities a temporary basis for tax payment. Basis for Assessment May use: Estimated income or profits Previous year’s tax data Partial or provisional accounts Purpose Ensures timely collection of taxes even when complete information is not yet available. Helps avoid delays in revenue collection for the government. Adjustment in Final Assessment Once complete accounts and accurate figures are submitted, the provisional assessment is adjusted. Taxpayer may pay additional tax or receive a refund depending on the difference.

Example: A business has not yet finalized its accounts for the current year. The tax authority conducts a provisional assessment using the previous year’s income of ₹50,00,000, applying the relevant tax rate. Later, after final accounts are submitted, the tax is recalculated to reflect actual income of ₹60,00,000, and the provisional tax is adjusted accordingly