Set off

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Querist : Anonymous

Querist : Anonymous (Querist)

07 April 2014 Can to Short Term capital gain available for set off against the MAT credit available to private Ltd co? Kindly specify the section?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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07 April 2014 no...not at all...please differentiate between income taxes and indirect taxes

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2014 set off agaoinst minimum alt tax?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Hi,

Your question is whether **Short-Term Capital Gains (STCG)** can be **set off against Minimum Alternate Tax (MAT) credit** available to a **Private Limited Company**.

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## 🔍 **Short Answer:**

**No**, **Short-Term Capital Gain (STCG)** **cannot be set off against MAT credit**.

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## 📘 **Explanation:**

You are mixing **types of tax obligations**:

* **STCG** (taxable under normal provisions of the Income Tax Act)
* **MAT Credit** (arises when a company pays tax under Section **115JB** — on book profits — instead of regular income tax)

### 🧾 **MAT Credit under Section 115JAA**:

* When a company pays **MAT** under Section 115JB, but **normal tax liability is lower**, the excess MAT paid becomes **MAT Credit**.
* This credit can be **carried forward for 15 assessment years** (as per the **post-AY 2018-19 amendment**).
* MAT Credit can be **adjusted against future regular income tax liability**, **but not against specific income heads like STCG**.

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### ✅ **How MAT Credit Works:**

| **Scenario** | **Can MAT Credit be Used?** |
| -------------------------------------------- | ------------------------------------------------------------- |
| If tax payable under normal provisions > MAT | ✅ Yes — MAT credit can reduce regular tax |
| If income includes STCG @ 15% | ❌ No — MAT credit cannot be set off against STCG tax directly |
| MAT credit carried forward to future years | ✅ Yes |

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## 📌 **Section Reference:**

* **Section 115JAA(2)** of the Income Tax Act says:

> *“Tax credit shall be allowed set off in a year where tax is payable on total income under normal provisions of the Act, to the extent of the difference between such tax and the amount of tax payable under section 115JB.”*

> 🔍 So, MAT credit is **not an asset to be set off against any type of income**, but **a tax credit** to be used **only when regular income tax exceeds MAT**.

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## ✅ Summary:

| **Item** | **Eligible for MAT Credit Set-Off?** |
| -------------------------------------- | ------------------------------------ |
| Short-Term Capital Gains (under 111A) | ❌ No |
| Regular tax payable > MAT in future AY | ✅ Yes |

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Let me know if you’d like an illustration with tax figures or a sample MAT credit computation.

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