Minimum Alternate Tax and Alternate Minimum Tax.

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Minimum Alternate Tax and Alternate Minimum Tax.

Minimum Alternate Tax and Alternate Minimum Tax

Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) although sounds interchangeable but, in reality we cannot use those words interchangeably. The concept of the provision is that the assessee is liable to pay tax when the tax as per normal provisions of income tax is less than the amount determined below:

  • at the rate of 18.5% of books profits in case of companies and
  • for assesses other than company 18.5% of Adjusted total income It is applicable to all assessees except companies

Applicability

The provision, that AMT is applicable to all assessees except companies, have the following exception:

AMT shall not be applicable if Individual/ Hindu Undivided Family/ Association of Person/ Body of Individual/ Artificial Juridical person have the Adjusted Total income of Rs. 20 lakhs or less.

The provision that MAT is applicable to companies has following exceptions:

For a company located in International Financial Service Sector the rate of tax shall be 9% instead of 18.5%.

MAT is not applicable to foreign company if

The company is resident of country with whom India has Double Taxation Avoidance Agreement and the company does not have permanent establishment in India.

The company is resident of country with whom India does not have Double Taxation Avoidance Agreement and the company is not required to seek registration under any law for the time being in force.

Computation

Computation of Adjusted Total Income for calculation of AMT

Total Income as computed under normal provisions of the Act xxx
ADD:
Deduction claimed under section 80-IA to 80RRB except u/s 80P )
Deduction claimed under section 10AA i.e. SEZ units xxx
Deduction claimed under section 35AD xxx
LESS:
Depreciation allowed u/s 32 of the Act assuming no deduction u/s 35 AD was allowed in respect of such assets (xxx)
Adjusted Total Income  xxx

Computation of Book Profit for calculation of MAT:

S. No Particulars
1 Net Profit as per profit and loss
Add:
(a) Amount of income tax paid or payable and the provision thereof

To be added Not to be added
1.     Income Tax

2.     CDT u/s 115-O

3.      Interest under Income tax Act

4.     Surcharge and Education Cess

1.     Security Transaction Tax

2.     Interest under other Acts

3.     Penalties

4.     Commodities Trnsaction Tax

(b) The amount carried to any reserve by whatever name called.
(c) The amount set aside for unascertained liabilities

To be added Not to be added
1.     Provision for leave encashment/ warranty on adhoc basis

2.     Provision of Gratuity on adhoc basis

3.     Provision for loss and contingencies.

1.     Provision for leave encashment/ warranty on scientific basis.

2.     Provision for gratuity on basis of Actuary

3.     Bad Debts written off.

(d) Provision for loss of subsidiary companies, even the actual loss.
(e)  Dividends paid or proposed
(f) Expense relatable to any income to which Section 10 (except Section 10(38)), 11, 12 is applicable. In case of foreign company, even Sec 10(38) exceptions are added back.
(fa) Expenditure relatable to income of share of assessee in AOP/ BOI on which no income tax is payable.
(fb) Expenditure relatable to income accruing to a foreign company from

Ø Capital gain on which STT is paid

Ø Interest , Royalty, fees for technical service chargeable to tax

If income tax payable thereon is less than 18.5%

(fc) Amount representing notional Loss
(fd) Expenditure relatable to income by way of Rayalty taxable u/s 115BBF
(g) Amount of depreciation debited to P&L
(h) Amount of deferred tax and provision therefor.
(i) Provision for diminution in the value of any assets.
(j) Amount standing in the revaluation reserve relating to revalued asset on the retirement or disposal of such asset.
(k) Amount of gain on transfer of units under section 47(xvii)
Less:
(i) Amount withdrawn from any reserves or provisions and credited to profit & loss account provided that book profit of relevant previous year should have been increased by such amount
(ii) Incomes Exempt u/s 10, 11 and 12, except section 10(38)
(iia) Amount of depreciation debited to profit & loss account, excluding the depreciation on account of revaluation of assets.
(iib) Amount withdrawn from revaluation reserve and credited to profit & loss account to the extent of depreciation on account of revaluation of asset.
(iic) Income of share of assessee in AOP/ BOI on which no income tax is payable.
(iid) Income accruing to a foreign company from

Ø Capital gain on which STT is paid

Ø Interest , Royalty, fees for technical service chargeable to tax

If income tax payable thereon is less than 18.5%

(iie) Amount representing notional Gain
(iif) Loss on transfer of units referred under section 47(xvii)
(iig) Income by way of Rayalty taxable u/s 115BBF
(iii) Amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of account. However loss shall not include the depreciation.
(iv) Profit of sick industrial company till net worth becomes zero
(v) Amount of Deferred Tax, is any such amount is credited in the profit & loss account.

Tax Credit available:

MAT and AMT credit shall be allowed to be carried forward and set-off upto 15 Assessment Years. AMT or MAT paid in excess of the regular income tax computed under the normal provision shall be eligible for tax credit.

The credit is allowable only in the year in which tax payable as per normal provision is in excess of payable as per MAT/AMT i.e. Credit cannot be used for payment of AMT/MAT.

Other Provision

  • In case of conversion of a company into LLP Mat credit available to company is not allowed in hands of LLP
  • IN case in one year AMT is applicable and in other year it is not applicable may be because of change in deductions or turnover limit i.e. chapter of AMT is not applicable in second year still the credit of AMT will be allowed.

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