MAT

 mat is the minm  amt of tax  2 b paid by a co.

in short

case1

if tax as per it act<10% of book profit, then tax to be paid = 10% of book profit

case2

if tax as per it act > 10% of book profit,tax to be paid = tax as per it act subject 2 mat credit

 

while calculating profits chageable to tax in case of companies, u have to simultaneously calculated tax as per MAT also and hve to compare it so however that the tax payable by the company shall not be less than MAT........in the yr in which the co. tax under mat, then the excess tax i.e. MAT minus normal tax under tax provisions can be taken as credit in the yr in which normal tax coming out to be more than MAT in later yrs. ............simple!! and the other side is already explained by Mr. Kabirsen....!!!!

Normally, a comapny is liable to pay tax on the income computed in accordance with the provisions of the Income Tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account

but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. Inorder to bring such companies under the Income Tax Act, net, section 115JA was introduced w.e.f assessment year 1997-98.

According to this section, if the taxable income of a company computed under this Act, in respect of previous year 1996-97 and onwards is less than 10% of its book profits,such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of 15%

Explanation.For the purposes of this clause,

(a) the loss shall not include depreciation;

(b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil

Explanation 2.

For the purposes of clause (

a

) of

Explanation 1

, the amount of income-tax shall include

(i) any tax on distributed profits under section 115-O

(ii) any interest charged under this Act;

(iii) surcharge, if any, as levied by the Central Acts from time to time;

(iv) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and

(v) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time.

The provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be.

A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under:-

    * When a company pays tax under MAT, the tax credit earned by it shall be an amount which is the difference between the amount payable under MAT and the regular tax. Tegular tax in this case means the tax payable on the basis of normal computation of total income of the company.
    * MAT credit will be allowed carry forward facility for a period of five assessment years immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT credit will be allowed to be accumulated subject to the five year carry forward limit.
    * In the assessment year when regular tax becomes payable, the difference between the regular tax and the tax computed under MAT for that year will be set off against the MAT credit available.
    * The credit allowed will not bear any interest.

Thanks every body for sharing your opinion................

Is it possible to to set off MAT liability( the company is liable to pay MAT in that year) against TDS credit avaible??? pls support ans with relevant section.

 yes....tds , advance tax, relief u/s90 91 always allowed as credit...they are prepaid taxes