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MAT credit entitlement

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What is MAT credit entitlement and its accounting treatment?
Replies (1)

Mat  Credit  entitlement  means , If   Your  Income  Tax  liability   as per  normal  provisions of  the Income  Tax  is less  than  provisions of MAT  then  company has  to pay higher  Income  Tax   ,in this case  when company pays  excess  of Income  Tax  then  normal  provision  then  excess  paid amount  is available  as  Mat  Credit  . 

This I will  explain with  Example 

A  Ltd  in financial  year 2018-19   Income   Tax  liability   as per  normal  provision is  8,40,000/- and as per  Mat  provision 10,00,000/-  so  as per rule  company  paying  100000/-  as higher income Tax  . So  Credit  of  1,60,000  is  available  in subsequent  years .(  10,00,00 - 8,40,000)   

In Next  Year  Normal  provision  Income Tax  liability  was  18,40,000/-  and as per Mat  18,00,000/-  so  higher we have to pay ,then you can utilize only 40,000/- Mat credit of  earlier  year  out  of  160000/-  and  pay 18,00,000/-  out  of  18,40,000/-  , because  current  income tax  liability should be less  than Mat  amount .     

     


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