31 May 2010
Dear Friends Pls anyone give me a full notes on MAT
Guest
Guest
(Expert)
31 May 2010
http://www.taxguru.in/income-tax/for-calculation-of-book-profit-us-115jb-profit-need-to-be-increased-by-deferred-tax-and-the-provision-thereof-if-debited-to-profit-and-loss-account.html
Querist :
Anonymous
Querist :
Anonymous
(Querist)
02 June 2010
I am still confuse in this matter pls give me full details
20 July 2025
What is MAT? MAT is a provision to ensure that companies which show zero or very low taxable income (due to exemptions, deductions, or other incentives) still pay a minimum amount of tax. It prevents companies from avoiding tax by reporting book profits but showing nil or negligible taxable income under normal Income Tax rules. Applicable to: All companies (Domestic & Foreign) other than those engaged in the business of banking, insurance, electricity generation or distribution (though these sectors have special provisions). It applies even if the company reports zero or low taxable income under the regular Income Tax provisions. Section & Rate: MAT is governed by Section 115JB of the Income Tax Act. The current MAT rate is 15% (plus applicable surcharge and cess) on the Book Profit of the company. What is Book Profit? Book profit is the profit shown in the company's financial statements prepared as per the Companies Act, adjusted for certain items as specified under Section 115JB. It is not the same as taxable income; rather, it is computed from the profit as per the profit & loss account with certain additions and deletions. How to compute Book Profit (basic outline): Start with:
Profit before tax as per P&L account Add back (if debited in P&L):
Income tax and deferred tax expenses Amounts carried to reserves (except for revaluation reserves and certain others) Loss on sale of fixed assets or investments not deducted for tax purposes Other specific disallowances Subtract:
Dividend income Profit on sale of certain assets (like investments in government securities) Income chargeable to tax under specific heads (The exact adjustments are detailed and should be referred in section 115JB.)
MAT Credit: If a company pays MAT in any year, but its regular income tax liability exceeds MAT, the excess tax can be claimed as MAT Credit. MAT Credit can be carried forward for up to 15 assessment years. It can be used to reduce future tax liability when regular tax exceeds MAT. When to pay MAT? MAT is paid as part of advance tax installments. MAT liability arises only if the tax computed under normal provisions is less than the MAT computed on book profits. Key Points: Companies with book profits must pay at least MAT. MAT is a minimum floor of tax, preventing tax avoidance. MAT is calculated on book profits, which often differ from taxable income. Filing of MAT returns and claiming MAT credit requires compliance with procedural rules.