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sec. 115JB provides for Minimum Alternate Tax (MAT) .

It is 15% of Book Profit for AY 2010-11

MAT stands for minimum alternate Tax. this is paid by a company which is having book profit or you can say accounting profit but loss as per the income tax law. in simple words taxable income is less than accounting income. then the company is not required to pay tax on taxable income but on at a flat rate on the book value of the assets. currently it is 15 % of the book value

Very simple and tricy concept of MAT. It was introduced when most of the companies were not paying any taxes and were claiming lots of exemptions allowed by govt.

Then IT dept thought of introducing MAT i.e. Minimum Alternate Tax which any company having taxable profit have to pay as per calculations as per the provisions.

MAT is also a tax only but difference is that this tax is for only corporate assessee. Here tax is calculated on book profit. thus even though company showing negative profit as per income tax but if book profit is there then it have to pay MAT at 15% otherwise it will liable to interest and penalty..

Regards,

Sumit R Soni

dear friends plz clear my doubt whether it is 15%  of book profit or book value of assets as submitted by ashish

15% of Book profit

Profit as per Profit & Loss Account prepared in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act.

15% of Book profit

Profit as per Profit & Loss Account prepared in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act.

Hey Tarun, MAT is 15% of "Book Profit" for A. Y. 2010-11 which is further revised to 18% for A. Y. 2011-12. I would like to suggest you to go through Sect. 115JB of Income tax Act to get better understanding of this concept.

dear tarun 

(a)The concept of Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but who were not contributing to the Govt by way of corporate tax, by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage(now days 15%) of book profit as minimum alternate tax. 

(b) average rate of tax is used when a person apply to AO for a certificate of lower deduction of tax u\s 197.

avg rate of tax 

1. avg rate of tax of immediate privious year 

2 avg  of avg rates of immediate 3 privious years 

whichever is higher