Corporate Tax Credits

Tax credit in respect of tax paid u/s 115JB

Where any amount of tax is paid u/s 115JB by a company then, Corporate Tax Credits in respect of tax so paid shall be allowed to the company.

Corporate Tax Credits for 115JB

  1. Where any amount of tax is paid as per section 115JB by an assessee being a company for the AY commencing on 01-April-2006 and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed as under: -

    1. The tax credit to be allowed shall be the difference of the tax paid for any assessment year as per section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act.

    2. The amount of tax credit shall be carried forward and set off. But such carry forward shall not be allowed beyond the tenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable.

  2. The tax credit shall be allowed to be set-off in the year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JB.

  3. Set off in respect of brought forward tax credit shall be allowed only to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of section 115JB.

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Where as a result of an order under section 143, 144, 147, 154, 155, 245D, 250, 254, 260, 262, 263 or 264, the amount of tax payable under this Act is reduced or increased, as the case may be, the amount of tax credit allowed under this section 115JAA shall also be increased or reduced accordingly.

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Example

Let's assume ABC Pvt Ltd, has Minimum Alternate Tax of Rs3,60,000, for AY 2011-12 as per section 115JB. The tax liability on normal total income of ABC Pvt Ltd, for the AY 2011-12 was Rs2,00,000.

Particulars Rs
Minimum Alternate Tax Paid as per section 115JB 3,60,000
Less: Tax Liability on Normal Total Income 2,00,000
Tax Credit as per Section 115JB 1,60,000

Tax Credit available for ABC Pvt Ltd., for MAT paid for the AY 2011-12 is, Rs1,60,000 (3,60,000 - 2,00,000). They can set-off this tax credit upto the AY 2021-22.

Now, let's assume for the AY 2012-13, the tax liability on normal total income of ABC Pvt Ltd., is Rs3,15,000 and the MAT Liability is Rs2,25,000. In such a case, the Company can claim benefit of MAT Credit, since its tax liability on Normal Total Income is more than MAT Tax Liability.

The Corporate Tax Credits that can be adjusted against tax liability on Normal Total Income is Rs90,000, i.e., the difference between the tax on normal total income (Rs3,15,000) and the MAT Tax Liability (Rs2,25,000).

It is sufficient, if ABC Pvt Ltd., pays Rs2,25,000 (3,15,000 - 90,000), for the AY 2012-13, against the actual tax liability of Rs3,15,000.

Besides, the company can carry forward the MAT Credit available, to the extent of Rs70,000 (Rs1,60,000 brought forward minus Rs90,000 adjusted during the year).

Finally, the tax liability is as under: -

Particulars Rs
Actual Tax Liability AY 2012-13 3,15,000
Less: Tax Credit as per Section 115JAA 90,000
Tax Payable 2,25,000

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