Alternate Minimum Tax

Difference between AMT and MAT

Before we proceed with Alternate Minimum Tax (AMT), let's understand the difference between MAT and AMT.

Minimum Alternate Tax (MAT) is applicable only for companies as per section 115JB of the Income Tax Act, 1961. And AMT is applicable for certain persons other than a company as per section 115JC.

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When the alternate minimum tax is Applicable?

The key points are,

Regular income-tax payable for a previous year by a person, other than a company, is less than the alternate minimum tax payable for such previous year,

the adjusted total income shall be deemed to be the total income of that person for such previous year, and

he shall be liable to pay income-tax on such total income at the rate of 18.5%.

If the person is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, then it is liable to pay alternate minimum tax at the rate of 9%.

Not Applicable

The provisions of this section shall not apply to a person who has exercised the option referred to in section 115BAC or section 115BAD.

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Adjusted Total Income

 Adjusted total income is the total income before giving effect to this Chapter as increased by

  (i) deductions claimed, if any, under any section included in Chapter VI-A under the heading “C.—Deductions in respect of certain incomes”; and

 (ii) deduction claimed, if any, under section 10AA; and

(iii) deduction claimed, if any, under section 35AD as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction under section 35AD was allowed in respect of the assets on which the deduction under that section is claimed.

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Report from an Accountant

Every person to whom this section applies shall,

  • obtain a report in prescribed format,
  • from an accountant,
  • certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter, and
  • furnish such report before the due date for furnishing the return of income.

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Tax Credit for AMT u/s 115JD

  1. The credit for tax paid by a person under section 115JC shall be allowed in accordance with the provisions of this section.
  2. The tax credit of an assessment year to be allowed shall be the excess of AMT paid over the regular income-tax payable of that year.
  3. No interest shall be payable on tax credit allowed.
  4. The amount of tax credit shall be carried forward and set off. But such carry forward shall not be allowed beyond the fifteenth assessment year immediately succeeding the assessment year for which tax credit becomes allowable.
  5. In any assessment year in which the regular income-tax exceeds the AMT, the tax credit shall be allowed to be set off to the extent of the excess of regular income-tax over the AMT and the balance of the tax credit, if any, shall be carried forward.
  6. If the amount of regular income-tax or the alternate minimum tax is reduced or increased as a result of any order passed under this Act, the amount of tax credit allowed under the section 115JC shall also be varied accordingly.
  7. Tax credit not applicable to a person who has exercised the option referred to in section 115BAC or section 115BAD.

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