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Minimum Alternate Tax (MAT) (Chapter-XIIB (Section 115J/ JAA/ JB) )
Minimum Alternate Tax (MAT) (Chapter-XIIB (Section 115J/ JAA/ JB) )
Background:
The levy of a minimum tax on compani es was first introduced throug h section 80VVA b y the Finance Act, 1983 w.e .f. A.Y. 1984- 85. The me thod adopted b y this section was to place a ceiling on the ag gregate quantum of incenti ves available under various provisions of the Ac t. However, the unab sorbed incentives were allowed to be carried forward and set off against taxable income in future years. The concept of tax on book profits wa s introduced originally under section 115J b y the Finance Act, 1987 with effect fr om A. Y. 1988-89 a nd it was withdrawn with effect from A.Y. 1990-91. Here, the tax was levied on 30% of Book Profits . Subsequently the c oncept was reintr oduced with a few c hanges, imposing Minimum Alterna te Tax (M AT) under section 115JA with effect from A.Y. 1997-98 a nd had effect up to A.Y.2000-01. Here , if the taxable income of a comp any computed under this Ac t, in respect of any previous year relevant to the assessment year commencing on or after 1.4.97 but before 1.4.2001 is less than 30 % of its book profits, the total income of such company, chargeable to tax for the relevant previous year shall be deemed to an amount e qual to 30 % of suc h book profits . Section 115JB was i ntroduced in Finance Act, 2000 w.e .f. 1.4.2001, whereby, a compa ny s hall be liable to pay higher of ta x computed under I ncome Tax Ac t provisions and tax computed under Sec 115JB . Ghalla & Bhansali Chartered Accountants Page 1
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Applicability:
The provisions of this chapter are ap plicable only to C ompanies and not to a ny other assess ee like I ndividual, HUF, Partnership Firm, etc.
Rate of tax u/s 115JB Tax ra te applicable u/s 115JB for various assessment year s are as follows : Period A.Y.2001-02 to A.Y.2006-07 A.Y.2007-08 to A.Y. 2009-10 A.Y.2010-11 A.Y.2011-12 onwards MAT Rate 7.5% 10% 15% 18%
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MAT credit sha ll be allowed to be carried forward as fo llo ws : Finance Act Finance Act, 2005 Finance Act, 2006 Finance Act, 2010 Period of carry fo rward 5 years 7 years 10 years
The a mount of MAT Credit to be carried for ward s hall be exclusive of Cess and Surcharg e.
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Working for cla iming MAT credit and carry forward of balance unutilized MAT credit : Year 1:
I f TP < M AT I f TP > M AT T a x L i a b i l i t y = M AT M AT (C r ) c / f = M AT T P T a x L i a b i l i t y = T P a s p e r I . T . Ac t M AT (C r ) c / f = N I L
Th e r e i s N O B o u g h t F o r w a r d M AT (C r ) I f TP > M AT T a x L i a b i l i t y = M AT M AT (C r ) c / f = C u r r e n t y e a r [ M AT T P ] Th e r e i s a n B o u g h t F o r w a r d M AT (C r ) I f N T P < M AT Ad j u s t a b l e M AT (C r ) = C u r r e n t Y e a r [ T P M AT ] T a x L i a b i l i t y = T P Ad j u s t e d M AT (C r ) = C u r r e n t Y e a r M AT M AT (C r ) c / f = M AT (C r ) b / f Ad j u s t e d M AT (C r )
Th e r e i s N O B o u g h t F o r w a r d M AT (C r ) T a x L i a b i l i t y = T P a s p e r I . T . Ac t M AT (C r ) c / f = N I L
W h er e ,
M AT = M i n i m um Al t e rn a t e Ta x TP = Ta x Pa ya b l e a s p er I n c o me T a x Ac t , 1 96 1
NT P = TP [B /f M AT c re di t ]
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Annexure I: Calculation of Book Profit under Sec 115JB(2) Particulars Profit as per P&L A/c (computed as per companies act) As Increased by : Income tax paid (including Tax on distributed profit u/s 115O, Distribution Tax u/s 115R, education cess, surcharge and interest on income tax ) Income tax Payable or Income tax provisions Any transfer to reserve Provisions for unascertained liability Provisions for loss of subsidiary company Dividend Paid/Proposed Expenses relating to exempt income u/s 10 (other than clause 38 of Sec 10) Expenses relating to exempt income u/s 11 Expenses relating to exempt income u/s 12 Depreciation (As per Companies Act) Amount of Deffered Tax & Provision Thereof Amount or amounts set aside as provision for dimunation in value of asset (to the extent any of above is debited to P & L A/c) As Reduced by : Withdrawal from the reserve or provisions Exempt income u/s 10 (other than clause 38 of Sec 10) Exempt income u/s 11 Exempt income u/s 12 The amount of loss b/f or unabsorbed depreciation , whichever is less as per books of accounts Profit eligible for deduction u/s 80HHC Profit eligible for deduction u/s 80HHE Profit eligible for deduction u/s 80HHF Profit of sick industrial company Profit of tonnage Tax Company (section-115VO) Depreciation (as per Companies Act) (however excluding depreciation on revaluation of assets) Amount withdrawn from the revaluation reserve to the extent it does not exceed the amount of depreciation on account of revaluation of assets Amount of Deffered Tax , if credited to P & L A/c Book Profits on which MAT is to be calculated Amount (Rs.) Amount (Rs.) xxx
Xx Xx Xx Xx Xx Xx Xx Xx Xx Xx Xx Xx xx xxx Xx Xx Xx Xx
Xx Xx Xx Xx Xx Xx Xx Xx Xx (xx) xxx
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Disclaimer : The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. We recommend that professional advice is sought before taking any action on specific issues.
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