What is MAT

It means "Minimum Alternate Tax"

Under the existing provisions of section 115JB of the Income Tax Act, a company is required to pay a Minimum Alternate Tax (MAT) on its book profit, if the income-tax payable on the total income, as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2010, is less than such minimum. The amount of tax paid under section 115JB is allowed to be carried forward and set off against tax payable upto the tenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under the provisions of section 115JAA.

It is proposed to amend sub-section (1) of section 115JB to increase the MAT rate to eighteen per cent from the existing fifteen per cent.

This amendment is proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.

Minimum Alternate tax (called “MAT”) was imposed on companies due to the increase in the number of zero-taxpaying companies.
Companies pays no or less tax, in spite of earning good book profits

Companies claims that their tax profit (as per provision of income tax Act) is nil or less so they (company) need not have to pay tax.
so to control the tax escaping companies & reduce evasion MAT was introduced.

Under MAT system a company has to pay
(1) income tax on profit computed as per income tax act,1961
OR
(2) @ 15% of book profit (as per accounts) after some simple adjustments mentioned u/s 115JB of the income tax act,1961.
Which ever is HIGHER

Source : caclubindia......