Alternate minimum tax

Alternate minimum tax is similar to MAT. MAT is applicable to companies whereas AMT is applicable to firms,LLP's and individuals etc.. The main intention is to make units in SEZ and units claiming exemption under Chapter IVA i.e 80IA,80IB etc.... who enjoy tax holiday exemption to pay tax and claim credit on the same in case they are earning book profits at a lower rate than the actual tax slabs.

NORMALLY, a company is liable to pay tax on the income computed in accordance with the provisions of the income tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies.

Corporations or companies with tax liability below 18.5% of book profits have to pay minimum alternate tax (MAT) @ 18.5% in addition to education cess and surcharge on the book profits computed as per the provisions of the Income Tax Act.

Many companies convert into LLP to avoid MAT provision. So AMT introduce to cover such companies.
Both copany & LLP have limited liability.