MAT

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Rakesh Singh (Querist)
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04 March 2010 can any one please explain with illustration what is MAT and how it is calculated. please explain with example.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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04 March 2010 MR RAKESH SINGH,

M.A.T. MEANS MINIMUM ALTERNATIVE TAX CHARGED U/S 115JB TO THE
COMPANIES. IT WAS FIRST INTODUCED BY V.P. SINGH WHEN HE WAS
THE FM OF OUR COUNTRY. HE REALISED THAT COMPANIES DECLARING
HUGE DIVIDEND AND PAYING LESSOR TAX. TO AVOID SUCH THINGS
HE INTODUCED MAT WHICH IS CHARGED @ 10%, current (18%) ON THE BOOK PROFIT DECLARED BY THE COMPANY.

HOW IS CALCULATION?

The provisions of section 115JB provide for working out the income-tax payable as MAT on a deeming basis. The MAT tax liability under section 115JB can be worked out by undergoing the following steps:

COMPUTE THE TOTAL INCOME OF THE COMPANY (IGNORING THE PROVISIONS OF SECTION 115JB).
COMPUTE THE INCOME-TAX PAYABLE ON TOTAL INCOME IS WORKED OUT UNDER (I) ABOVE. WORK OUT THE BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115JB.
CALCULATE 7 Â½ PER CENT OF BOOK PROFIT (AS PER PROVISIONS OF SECTION 115JB).

MAT TAX LIABILITY AS WORKED OUT UNDER (IV) ABOVE WOULD BE THE TAX PAYABLE IF IT IS MORE THAN THE AMOUNT OF TAX WORKED OUT (II) ABOVE.
TO ILLUSTRATE, WHERE AXN LTD. HAD ITS COMPUTED TOTAL INCOME AT RS.100 LAKHS AND ITS BOOK PROFIT AS COMPUTED UNDER SECTION 115JB IS RS.600 LAKHS. IN SUCH AN EVENT, THE FOLLOWING WOULD BE THE CALCULATION OF MAT TAX LIABILITY UNDER SECTION 115JB FOR ASSESSMENT YEAR 2001-2002 AS DISCUSSED ABOVE :

i) Total Income = Rs.100 lakhs
ii) 38.5% of total income being tax payable (incl. 10% surcharge = Rs.38.50 lakhs
iii) Book Profit = Rs.600 lakhs
iv) 8.25% [7.50% + 0.75% surcharge] = Rs.49.50 lakhs
v) Income tax payable under MAT (since higher than tax on total income at (ii) above) = Rs.49.50 lakhs

Hence, the tax payable by AXN Ltd. for assessment year 2001-02 would be Rs.49.50 lakhs since the tax payable on book profit under section 115JB is higher than the tax payable on computed Total Income

FOR MORE DETAILS EMAIL ME :

ramesh.arti@yahoo.co.in

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