MAT credit

Taxable income and tax liability - how to computed

It determined as follows –

1.First ascertain income under the different head of income.

2.Income of other persons may be included in the income of the company under section 60 and section 61.

3.current and brought forward losses should be adjusted according to the provision to the provisions of section 70 to 80.provision of section 79 regarding set-off and carry forward of losses of closing held companies.

4.The total of income so computed under different heads is gross total income.

5.From the gross total income so computed the following deductions are permissible under sections 80C to 80U.

6.The resulting sum is Net income.

Text liability-Tax liability of a company is calculated as follows—

Computation 1-Under normal

Provisions

Computation 2-Under minimum

alternates tax

Step 1 -Find out taxable income under

normal provisions

Step 8-Find out book profit

Step 2 -Find out income-tax at the rate

of 30 percent 40 percent in the case of
a foreign company of income
computed under (1) supra.

There is no exemption limit.

Step 9-Find out 10 per cent of book

Profit

Steps 3 - Add surcharge at the rate of

10percent of (2) [2.5 percent in the
case of a foreign company}, if net
income exceeds Rs 1 crore.

Step 10-Add surcharge at the rate of

10 percent[2.5 percent in the case of
foreign company]if the book profit
exceed Rs 1 crore

Steps 4 - Find out(2) + (3)

Step 11-Find out(9)+(10) of 2 percent of (4) and secondary andhigher education cess at the rate of 1percent of (4).

Steps 5 -Add education cess at the rate

Step 12-Add education cess at the rate

of 2 percent of (11 )and secondary and

higher education cess at the rate of 1

percent of(11).

Steps 6 -Deduct tax rebate or tax credit under section 86,90,90A and 91£

Steps 13find out(11)+(12)

Steps 7 -Find out(4)+(5)-(6)[it cannot

be less then zero]

Tax liability of a company is steps 7 or steps 13.which every is more.

1.If tax computed at step 7 is more than (or equal to) tax computed at step 13, the provision of minimum alternate tax are not applicable.

2.If tax computed at step 7 is less than tax computed at step 13,the provision of minimum alternate tax are applicable.

3.The extra tax which the company has to pay because of minimum alternate tax [i.e. step13 minus step7] will be available for “Tax credit” under section 115AA.Tax credit can be set off against future tax liability of the company subject to few conditions. However, the tax credit is available only in that year in which tax computed at step 7 is more than tax computed at step 13.

NOTE:-

* IN the case of long-term capital gain’ it is 20 percent .In the case of winning from
lotteries, it is 30 percent. There are a few more cases where a special rate of tax applicable
[see annex 1]

£ There is no merit in contention that before adding surcharge, tax payable is to

reduced by credit for double taxation.

However, the provision of section 115JB will not be applicable in respect to income
accrued or arising after march 31,2005 from any business carried on, or service
renderedby an entrepreneur or a developer ,in a unit or special economic zone, as
the case maybe .moreover. tonnage income of a shipping company is subject to
minimum alternate tax

ALSO I ATTACH THE SAME MATTER IN PDF MODE FOR YOUR DOWNLOAD PURPOSE.

Regards

K.N.V.V.S.K.Sri Kanth