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Minimum Alternative Tax


sumadhura arya   05 November 2017

sumadhura arya

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Is MAT is applicable for Special Economic Zones ?please explain about MAT with relevant examples.

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Sri Lakshmi   05 November 2017

Sri Lakshmi

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Dear Sumadhura arya,

Minimum Alternate Tax is applicable to SEZ. MAT is payable under section 115JB of Income Tax act 1961. With the introduction of MAT, the companies have to pay fixed percentage of their profits as Minimum Alternate Tax. The main intention is to see that no taxpayer with significant income gets to avoid tax liability on account of various deductions, exclusions and credits.

Every company has to pay higher of tax calculated below.
1. Tax liability as per normal provisions of income tax act 1961.
2. ‎Tax liability as per MAT provisions ( 18.5% + 3% education cess and surcharge if applicable).

For example, if the company is having a taxable income as per normal provisions of income tax act of RS. 30 lakhs and book profits of RS. 50 lakhs.

Tax payable will be higher of the following two:
1. 30,00,000 @ 30% plus 3% = RS. 9,27,000
2. ‎50,00,000 @ 18.5% plus 3% = RS. 9,52,750

Hence tax payable by the company will be RS. 9,52,750.

MAT credit = RS. 9,52,750-Rs. 9,27,000 = RS. 25,750 shall be carried forward for 10 assessment years.

The credit can be adjusted in the year in which the libility of the company as per normal provisions is more than the MAT liability. The set off is allowed in the subsequent years to the extent of the difference between the tax as per normal provisions and as per the MAT provisions.

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sumadhura arya   05 November 2017

sumadhura arya

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Thank you so much ☺

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Vamsi Lade (Student CA IPCC)     05 November 2017

Vamsi Lade
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what is alternate minimum tax?

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sumadhura arya   05 November 2017

sumadhura arya

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AMT is tax levied by United States federal government

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Vamsi Lade (Student CA IPCC)     05 November 2017

Vamsi Lade
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The Alternate Minimum Tax (AMT) is income tax imposed by the United States federal government on individuals, corporations, estates and trusts. The AMT was enacted in 1982.

This concept was taken by India in the Finance Act, 2011. Finance Act, 2011 introduced a new “Chapter XIIBA” to provide payment of Alternate Minimum Tax (AMT) by LLPs and after that it has been amended by Finance Act, 2012 in which it is covered all non-corporate assesses. However, AMT is not payable by Individual, HUF, Association of Persons/ Body of Individuals and Artificial judicial person if adjusted total income of such person does not exceed Rs 20 Lac.

The AMT is required to be paid  at the rate of eighteen and half percentage as increased by education cess and higher secondary education cess i.e. 19.055%. The AMT is payable only if the tax payable under the normal provision is lesser than AMT.

AMT will also apply to the assesses claiming profit linked deductions Part C of Chapter VI-A i.e. under section 80-IA to 80RRB and under section 10AA. However, deduction under section 80P shall not be added back. Also Deduction under section 80C to 80GGC, 80U and 80TTA shall not be added back.

Further we have to say that if a person claims deduction under section 35AD, then he is not eligible to claim deduction under section 80-IA/ 80-IB/ 80-IC/ 80-ID. So, a person claims deduction under section 35AD is not liable to pay AMT. Therefore, it is beneficial to the assessee to claim deduction under section 35AD rather than to claim deduction under section 80-IA/ 80-IB / 80-IC/80-ID.

The assessee has profits and gains of business or profession on presumptive basis under section 44AD, 44AE, 44B, 44BB, 44BBA and 44BBB. Section 44AD does not apply to taxpayers claiming profit linked tax holiday. Therefore, total income is computed taken into account profits and gains of business or profession on presumptive basis. If the assessee is eligible to take deduction under section 1 0AA or deduction under Chapter VI-A, then such deductions shall be added back to the total income for computation of adjusted total income.

Calculation of Adjusted Total Income

Total income as per normal provision of Income Tax Act                        xx

Add: Deduction under Part C of Chapter VI-A (Except Section 80P)          xx

Add: Deduction under section 1 0AA (Profits of SEZ units)                      xx

AMT Credit

Section 11 5JD of the Act provides for tax credit of AMT. The Tax credit is allowed for that assessment year in which AMT is excess than tax payable under normal provisions. The tax credit is allowed for next 10 assessment year in which tax payable under normal provisions is more than AMT.

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sumadhura arya   06 November 2017

sumadhura arya

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Then MAT and AMT are one and the same isn't it?

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Vamsi Lade (Student CA IPCC)     06 November 2017

Vamsi Lade
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I do think so


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