Mat

Minimum Alternate Tax - MAT for companies was introduced due a rise in the number of zero tax companies, wherein a company was declaring a book profit and declaring dividends to shareholders, while not paying any income tax since the income computed as per income tax act was negative or negligible. In order to bring such companies into the income tax net and make them pay income tax, MAT was introduced in 1983 .

For companies, the Minimum Alternate Tax (MAT) rate applicable is 18.5% of the book profit for the assessment year 2015-16. Therefore, a company has to pay taxes based on the higher of income tax profit of the company or the MAT at 18.5% of the book profit.

If the amount of MAT paid by a company is in excess of regular tax paid, then the excess amount is classified as MAT credit and can be carried forward by the company to setoff future tax liability.