MAT and AMT

Disclaimer:

The contents of this document are for information purposes only. This aims to enable public to have a quick and an easy access to information and do not purport to be legal documents.

Viewers are advised to verify the content from Government Acts/Rules/Notifications etc.

“This document contains the provisions of the Income-tax Act, 2025, as amended by the Finance Act, 2026.”

MAT AND AMT

MAT stands for Minimum Alternate Tax, and AMT stands for Alternate Minimum Tax. Initially, the concept of MAT was introduced for companies, and it has since been extended to all other taxpayers as AMT. In this part, you can gain knowledge about various provisions relating to MAT and AMT. First of all, we will understand the provisions of MAT and thereafter the provisions of AMT.

Objective of levying MAT

At times it may happen that a taxpayer, being a company, may have generated income during the year, but by taking advantage of various provisions of the Income-tax Law (like exemptions, deductions, depreciation, etc.), it may have reduced its tax liability or may not have paid any tax at all. Due to an increase in the number of zero-tax-paying companies, MAT was introduced by the Finance Act, 1987, with effect from assessment year 1988-89. Later on, it was withdrawn by the Finance Act, 1990 and then reintroduced by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.

The objective of introducing MAT is to bring into the tax net "zero tax companies" that, despite having earned substantial book profits and paid handsome dividends, do not pay any tax due to various tax concessions and incentives provided under the Income-tax Law.

The MAT was levied under Section 115JB of the repealed Income-tax Act 1961, and it is now charged as per the provisions of Section 206 of the Income-tax Act 2025.

Basic provisions of MAT

As per the concept of MAT, the tax liability of a company will be the higher of the following:

• Tax liability of the company computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the company by applying the tax rate applicable to the company. Tax computed in the above manner can be termed as normal tax liability.

• Tax computed @ 14% (plus surcharge and cess as applicable) on book profit (manner of computation of book profit is discussed in later part). The tax computed by applying 14% (plus surcharge and cess, as applicable) to the book profit is called MAT.

Note:

MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre (IFSC) and deriving its income solely in convertible foreign exchange.

Illustration

The taxable income of Essem Minerals Pvt. Ltd. computed as per the provisions of the Income-tax Act is Rs. 8,40,000. Book profit of the company computed as per the provisions of section 206 is Rs. 18,40,000. What will be the tax liability of Essem Minerals Pvt. Ltd. (ignore cess and surcharge)?

The tax liability of a company will be the higher of: (i) Normal tax liability, or (ii) MAT. Normal tax rate applicable to an Indian company is 30%* (plus cess and surcharge as applicable). Tax @ 30% on Rs. 8,40,000 will amount to Rs. 2,52,000 (plus cess). Book profit of the company is Rs. 18,40,000. MAT liability (excluding cess and surcharge) @ 14% on Rs.18,40,000 will come to Rs. 2,57,600.

Thus, the tax liability of Essem Minerals Pvt. Ltd. will be Rs. 2,57,600 (plus cess as applicable) being higher than the normal tax liability.

Note: * A domestic Company is taxable at the rate of 25% if its turnover or gross receipts do not exceed Rs. 400 crores in the financial year 2024-25. In this case, it is assumed that the Company's turnover exceeds Rs. 400 crores for the financial year 2024-25.

Illustration

The taxable income of SM Energy Pvt. Ltd. computed as per the provisions of the Income-tax Act is Rs. 28,40,000. Book profit of the company computed as per the provisions of section 206 is Rs. 18,40,000. What will be the tax liability of SM Energy Pvt. Ltd. (ignore cess and surcharge)?

The tax liability of a company will be the higher of: (i) Normal tax liability, or (ii) MAT. Normal tax rate applicable to an Indian company is 30%* (plus cess and surcharge as applicable). Tax @ 30% on Rs. 28,40,000 will amount to Rs. 8,52,000 (plus cess). Book profit of the company is Rs. 18,40,000. MAT liability (excluding cess and surcharge) @ 14% on Rs.18,40,000 will come to Rs. 2,57,600.

Thus, the tax liability of SM Energy Pvt. Ltd. will be Rs. 8,52,000 (plus cess as applicable), being higher than the MAT liability.

Applicability and non-applicability of MAT

As per section 206, every taxpayer being a company is liable to pay MAT if the Income- tax (including surcharge and cess) payable on the total income, computed as per the provisions of the Income-tax Act in respect of any year, is less than 14% of its book-profit + surcharge (SC) + health & education cess.

However, the provisions of MAT are not applicable on:

a) The domestic companies which have opted for alternative tax regimes under Section 200 or Section 201;

b) Any income accruing or arising to a company from the life insurance business referred to in Section 194 Table Sr. No. 6;

c) Shipping company, the income of which is subject to tonnage taxation.

Further, the MAT provisions shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if—

(i) the assessee is a resident of a country or a specified territory with which India has an agreement referred to in section 159 or the Central Government has adopted any agreement under sub-section (2) of section 159 and the assessee does not have a permanent establishment in India in accordance with the provisions of such agreement; or

(ii) the assessee is a resident of a country with which India does not have an agreement of the nature referred to in clause (i) and the assessee is not required to seek registration under any law for the time being in force relating to companies.

The MAT provisions shall not be applicable to a foreign company, whose total income comprises profits and gains arising from business referred to in section 61(2) and such income has been offered to tax at the rates specified in those sections.

Meaning of book profit*

As per Section 206(1)(c), "book profit" means net profit as shown in the statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013, as increased and decreased by certain items prescribed in this regard. The items to be increased and decreased are as follows:

Computation of book profit (Table A)

Particulars	Amount
Net profit as per statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013	***
Add: Following items (if they are debited to the statement of profit and loss)
Income-tax paid/payable and the provision thereof (*)	***
Amounts carried to any reserves by whatever name called	***
Provisions for unascertained liabilities	***
Provisions for losses of subsidiary companies	***
Dividends paid/proposed	***
Expenditure related to incomes which are exempt under section 11 or out of the regular income of Registered NPO referred to in Section 335	***
The amount or amounts of expenditure relatable to, income, being share of the taxpayer in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 310.	***

The amount of expenditure relatable to income accruing or arising to a taxpayer being a foreign company, from: (a) the capital gains arising on transactions in securities; or (b) the interest, dividend royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XIII The expenses shall be added back, provided the corresponding income is taxable at a rate lower than the MAT rate.	***
The following losses: (a) Notional loss on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in section 70(1)(zi); or (b) Notional loss resulting from any change in carrying amount of said units; or (c) The amount of loss on transfer of units referred to in section 70(1)(zi)	***
Expenditure relatable to income by way of royalty in respect of patent chargeable to tax under section 194(1)	***
Amount of depreciation debited to P & L A/c	***
Deferred tax and the provision thereof	***
Provision for diminution in the value of any asset	***
The amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such an asset if not credited to statement of profit and loss	***
The amount of gain on transfer of units referred to in section 70(1)(zi) computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through statement of profit and loss as the case may be;	***
Less: Following items (if they are credited to the statement of profit and loss)
Amount withdrawn from any reserve or provision if credited to P&L account^**	(***)
Incomes which are exempt under section 11 or regular income of a registered NPO referred to in section 335	(***)
Amount of depreciation debited to statement of profit and loss (excluding the depreciation on revaluation of assets)	(***)

Amount withdrawn from revaluation reserve and credited to statement of profit and loss to the extent it does not exceed the amount of depreciation on revaluation of assets	(***)
The amount of income, being the share of the taxpayer in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 310, if any such amount is credited to the statement of profit and loss	***
The amount of income accruing or arising to a taxpayer being foreign company, from: (a) the capital gains arising on transactions in securities; or (b) the interest, dividend royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XIII These incomes shall be reduced only if they are taxable at a rate lower than the MAT rate.	***
The amount (if any, credited to the statement of profit and loss) Representing: (a) Notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in section 70(1)(zi); or (b) Notional gain resulting from any change in carrying amount of said units; or (c) Gain on transfer of units referred to in section 70(1)(zi), The amount representing notional gain on transfer of units referred to in section 70(1)(zi)computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through statement of profit and loss, as the case may be;	***
Income by way of royalty in respect of patent chargeable to tax under section 194(1)	***

Aggregate amount of unabsorbed depreciation and loss brought forward in case of: (a) A company and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal, on an application moved by the Central Government under Section 241 of the Companies Act, 2013 has suspended the Board of Directors of such company and has appointed new directors who are nominated by the Central Government under Section 242 of the said Act; (b) A company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under Section 7 or Section 9 or Section 10 of the Insolvency and Bankruptcy Code, 2016
Amount of brought forward loss or unabsorbed depreciation, whichever is less as per books of account (in case of a company other than the company undergoing insolvency proceedings)	(***)
Profits of a sick industrial company till its net worth becomes zero/positive	(***)
Deferred tax, if credited to statement of profit and loss	(***)
Book profit to be used to compute MAT	*******

(*) The amount of Income-tax shall include:

i. Any interest charged under this Act;

ii. Surcharge, if any, as levied by the Central Acts from time-to-time;

iii. Education Cess on Income-tax, if any, as levied by the Central Acts from time-to-time; and

iv. Secondary and Higher Education Cess on Income-tax, if any, as levied by the Central Acts from time-to-time.

(**) Withdrawals made from reserves created or provisions made shall be deducted only if the book profit of the year of creation of such reserve has been increased by the amount transferred to such reserve or provisions (out of which the said amount was withdrawn).

For example, Governmental grants relating to depreciable assets are credited to special reserve (i.e., not to statement of profit and loss) in the year of receipt, and a portion of such grant is transferred from that reserve to statement of profit and loss over the life of the asset in proportion to depreciation charged. In the year in which these grants were credited to special reserve, they had not been added to net profit for calculation of book profit subjected to MAT. Therefore, in the year of transfer to P&L, the amounts so transferred shall not be reduced from net profit while calculating book profit for the purpose of MAT.

Meaning of book profit for Indian Accounting Standards (Ind AS) compliant companies

1. As per section 206(1)(d)(ix), “book profit” for an Ind-AS compliant company for the purpose of section 206 means the book profit as computed in accordance with section 206(1)(c) as:-

(a) increased by all amounts credited to other comprehensive income (OCI) in the statement of profit and loss that will not be reclassified to profit or loss;

(b) decreased by all amounts debited to other comprehensive income (OCI) in the statement of profit and loss that will not be reclassified to profit or loss;

(c) increased by all amounts or aggregate of amounts debited to the statement of profit and loss on distribution of non-cash assets to shareholders in a demerger of companies in accordance with Appendix A of Ind AS 10; and

(d) decreased by all amounts or aggregate of amounts credited to the statement of profit and loss on distribution of non-cash assets to shareholders in a demerger of companies in accordance with Appendix A of Ind AS 10.

2. Any item credited/debited to OCI that will not be reclassified to profit or loss should be ignored for the purpose of computing book profit if that item is:

(i) Revaluation surplus for assets as per Ind AS 16 and Ind AS 38; or

(ii) Gains or losses from investments in equity instruments measured at fair value through other comprehensive income (FVTOCI) as per Ind AS 109.

But, the book profit of the tax year in which the asset or investment as referred to in above points (i) and (ii) is retired, disposed, realised or otherwise transferred shall be increased or decreased by the amounts of above points (i) and (ii) to the extent relatable to the disposed asset or investment.

3. In the case of a resulting company, where the assets and liabilities of the undertaking or undertakings being received by it are recorded at values different from values appearing in the books of account of the demerged company immediately before demerger, any change in such value shall be ignored for the purpose of computation of book profit of the resulting company.

4. So, for the computation of book profit of an Ind AS compliant company, you may proceed as follows:

Particulars	Amount
Book profit as computed in Table A	***
Adjustments as mentioned in point (3) above	***
Adjustments for revaluation gain/loss for fixed assets & intangible assets in the year of their disposal or transfer	***
Adjustments for gains or losses from investments in equity instruments measured at FVTOCI in the year if their disposal or transfer	***

Adjustments for any other OCI items that will not be re-classified to profit or

Loss

***

Book profit to be used to compute MAT

***

5. The adjustments arising on account of transition to Ind AS from existing Indian GAAP are required to be recorded under Other Equity in the balance sheet. The amount of these adjustments is defined as the transition amount. The amount of such adjustments that will not be reclassified should be included in the computation of book profit equally over a period of 5 years starting from the year of first-time adoption of Ind AS, subject to certain exclusions.

Summary

The Book Profit of an Ind-AS-compliant company shall be computed in the following manner:

Calculation of Book Profit of Ind-AS-compliant company

Amount

Book profit as per general provisions of Section 206

Add: Items credited to OCI which shall not be reclassified to Profit or Loss Statement:

(a) Revaluation gain in respect of transferred tangible assets

(b) Revaluation gain in respect of transferred intangibles assets

(d) Increase in fair value of retirement benefits (defined benefit assets)

(e) Gain on measurement of fair value of investment in equity instruments at the time of transfer (measured at FVTOCI)

(f) Decrease in fair value of liability that is attributable to change in credit risk (measured at FVTPL)

(g) Increase in time value of an Option Contract that hedges a Transaction Related Hedged Item to the extent it relates to the hedged item

(h) Increase in value of forward element of forward contract (being an asset) when separating the forward element and spot element of a forward contract

(i) Decrease in value of forward element of forward contract (being a liability) when separating the forward element and spot element of a forward contract

Add: Items debited to Profit or Loss Statement:

(a) Difference between carrying amount of assets and dividend payable in case of distribution of non-cash assets to shareholders as dividends in a demerger

Less: Items debited to OCI which shall not be reclassified to Profit or Loss Statement:

(a) Revaluation loss in respect of transferred tangible assets

(b) Revaluation loss in respect of transferred intangibles assets

(d) Decrease in fair value of retirement benefits (defined benefit assets)

(e) Loss on measurement of fair value of investment in equity instruments at the time of transfer (measured at FVTOCI)

(f) Increase in fair value of liability that is attributable to change in credit risk (measured at FVTPL)

(g) Decrease in time value of an Option Contract that hedges a Transaction Related Hedged Item to the extent it relates to the hedged item

(h) Decrease in value of forward element of forward contract (being an asset) when separating the forward element and spot element of a forward contract

(i) Increase in value of forward element of forward contract (being a liability) when separating the forward element and spot element of a forward contract

Less: Items credit to Profit or Loss Statement:

(a) Difference between carrying amount of assets and dividend payable in case of distribution of non-cash assets to shareholders as dividends in a demerger

***

(***)

Book Profits for MAT

***

MAT credit

As discussed in the earlier part, a company has to pay the higher of normal tax liability or liability as per MAT provisions. If in any year the company pays liability as per MAT, then it is entitled to claim credit of MAT paid over and above the normal tax liability in the subsequent year(s). Only the MAT credit generated under the repealed ITA 1961 can be claimed. The provisions relating to carry forward and adjustment of MAT credit are given in section 206(3)/ (4).

Under the repealed ITA 1961, if the MAT paid exceeded the amount of tax as per the general provision, such excess amount was deemed as MAT Credit. Whereas under the ITA 2025, no new MAT credit will accrue to a company where MAT exceeds the tax payable under the normal provisions. However, MAT credit accumulated under Section 115JAA of the repealed ITA 1961 is permitted to be carried forward and set off under the ITA 2025 by foreign companies, and by domestic companies shifting to the concessional tax regimes under Section 200 and Section 201. Domestic companies can set off MAT credit up to 25% of the tax payable on the total income computed under the concessional tax regimes.

Provided that where the amount of Foreign Tax Credit (‘FTC’) allowed against the MAT exceeds the amount of such FTC admissible against the tax payable by the assessee under normal provisions of the Income-Tax Act, then, while computing the amount of FTC under this sub- section, such excess amount shall be ignored.

Also, where a private company or an unlisted public company is converted into an LLP, the MAT credit of such company is not allowed to be carried forward by the succeeding LLP, as an LLP is not covered by the MAT provisions. MAT credit lapses on such conversion.

Adjustment of carried forward MAT credit

Under the repealed ITA 1961, the MAT Credit may be carried forward and can be utilised by the company in the year in which the liability of the company as per the normal provisions is more than the MAT liability for 15 assessment years from the initial assessment year in which the tax credit becomes allowable. Under the ITA 2025, no new MAT credit accrues to a company. Further, only specified companies can carry forward the MAT credit accumulated under the ITA 1961 for the remaining period out of the total 15-year period.

MAT credit shall be increased or reduced where normal tax liability changes due to an assessment order or an appellate order.

Utilisation of MAT credit

No new MAT credit accrues under the ITA 2025. However, MAT credit accumulated under Section 115JAA of the repealed ITA 1961 as on 31-03-2026 may be carried forward and set off under the ITA 2025 by:

(a) domestic companies opting for concessional tax regimes; and

(b) foreign companies.

A domestic company opting for the concessional regime under Section 200(5) or Section 201(2) may set off MAT credit. A company continuing under the normal regime cannot utilise accumulated MAT credit until it shifts to the concessional regime. The maximum set-off in a tax year cannot exceed 25% of the tax payable for that year. Any unutilised balance shall continue to be carried forward.

Foreign companies liable to MAT may set off MAT credit only where normal tax exceeds MAT liability. The quantum of set-off is restricted to the difference between normal tax liability and MAT for that year.

Unutilised MAT credit cannot be carried forward beyond the 15th tax year immediately succeeding the year in which such credit first became allowable under Section 115JAA of the repealed ITA 1961.

Illustration

Essem Energy Ltd. opted for the alternate tax regime of Section 200 in the tax year 2026-27. Its tax liability for the tax year 2026-27 under the normal provisions of the Income-tax Act is Rs. 18,40,000, and the liability as per the provisions of MAT is Rs. 18,00,000. It has brought forward MAT credit of Rs. 2,00,000 under the repealed ITA 1961. Can the company adjust the MAT credit? If yes, then how much and what will be the tax liability of the company after adjustment of the MAT credit?

MAT credit can be adjusted in the year in which the liability of the company as per the normal provisions is more than the MAT liability. In this case, the liability as per the normal provisions of the Income-tax Act is Rs. 18,40,000, and the liability as per the provisions of MAT is Rs. 18,00,000. Liability as per the normal provisions is more than liability as per the provisions of MAT and, hence, the company can adjust the MAT credit.

The set-off in respect of brought forward MAT credit shall be allowed in the subsequent year(s) to the extent of the difference between the tax on total income as per the normal provisions and liability as per the MAT provisions. Thus, after set-off of MAT credit, the liability of the company cannot be less than the liability as per the provisions of MAT. In this case, the liability as per MAT is Rs. 18,00,000, and, hence, after claiming set-off of the MAT credit, the liability of the company cannot be less than Rs. 18,00,000. Hence, out of the credit of Rs. 2,00,000, the company can claim credit of Rs. 40,000 only and the balance credit of Rs. 1,60,000 can be carried forward to the next year(s).

Re-computation of Book Profits of Past Years due to APA or Secondary Adjustment

Where there is an increase in book profit of a tax year due to income of past year(s) included on account of an APA under Section 168 or a secondary adjustment under Section 170 of the ITA 2025, the Assessing Officer shall, on application made by the assessee:

• Recompute the book profit of the relevant past years; and

• Recompute the MAT payable for the relevant tax year.

Such re-computation is permitted only if the assessee has not utilised the MAT credit in subsequent tax years ending on or before 31-03-2026. The re-computation of the book profit and MAT credit will be carried out in accordance with Rule 118 of the Income-tax Rules, 2026.

Mechanism for adjustment of MAT credit

Rule 118 provides the following mechanism for recomputation of MAT credit:
(a) MAT liability of the current and relevant past years is computed twice, once including and once excluding the past income.

(b) The difference represents MAT attributable to the past income.

(c) Such amount is reduced from the MAT liability of the current year and adjusted in the MAT credit of the relevant past years.

Thus, no fresh MAT credit is created; the mechanism merely reallocates MAT to the relevant past years and aligns the MAT credit chain.

A claim for the above relief shall be made in Form No. 53 by uploading a signed copy in the prescribed manner. The form shall be verified by the person authorised to verify the return of income.

Recomputation of book profit and MAT shall apply only up to the year in which the company remains liable to MAT. No recomputation is required after shifting to a concessional tax regime.

Adjustment on filing of updated return

Where an updated return for an earlier tax year reduces MAT credit available for carry forward, the assessee shall furnish updated returns for all subsequent years in which such credit was carried forward or utilised.

Report from chartered accountant

Every company to whom the provisions of section 206 apply is required to obtain a report from a chartered accountant in Form No. 66 certifying that the book profit has been computed in accordance with the provisions of section 206. The filing has to be done electronically at least one month before the due date of furnishing the return of income under Section 263(1) or along with the return of income furnished in response to a notice issued under Section 268(1)(a).

Provisions relating to AMT

The provisions of MAT are applicable to a corporate taxpayer only. The provisions relating to AMT are applicable to non-corporate taxpayers in a modified form as Alternate Minimum Tax (AMT). Thus, it can be said that MAT applies to companies and AMT applies to persons other than companies. The provisions relating to AMT are given in section 206(2).

Basic provisions relating to applicability of the AMT to different taxpayers

The provisions of AMT will apply to every non-corporate taxpayer who has claimed (i) deduction under Chapter VIII-C (except 149) and (ii) deduction under section 46 as reduced by depreciation under section 33 (assuming no such deduction was allowed). Thus, the provisions of AMT are not applicable to a non- corporate taxpayer who has not claimed any deduction under the above-discussed sections. However, the following points should be kept in mind in this regard.

• The provisions of AMT shall apply to an individual or a Hindu undivided family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person only if the adjusted total income (discussed later) of such person exceeds Rs. 20,00,000.

• The provisions of AMT shall apply to every other person (i.e., other than an individual or a HUF or an AOP/BOI or an artificial juridical person) irrespective of its income. For the definition of a person, refer to section 2(77)(g).

Further, the provisions of AMT are not applicable to a person:

(a) Who has exercised the concessional tax regime available under section 202, 203, or 204; or

(b) Any specified fund referred to in Schedule VI (Note 1).

Rate of AMT

In case of a non-corporate taxpayer, AMT is levied @ 18.5%* of adjusted total income (discussed later). Surcharge and cess as applicable will also be levied. However, AMT is levied @ 9% in case of a non-corporate assessee being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange. Surcharge and cess as applicable will also be levied.

* Rate of AMT is 15% in case of a co-operative society.

Meaning of adjusted total income

In case of a non-corporate taxpayer, adjusted total income is computed in the following manner :

Particulars	(Rs.)
Taxable income of the taxpayer	***
Add: Amount of deduction claimed under chapter VIII-C (except 149)	***
Add: Amount of deduction claimed under section 46 (as reduced by the amount of depreciation allowable in accordance with the provisions of section 33)	***

Adjusted total income	*******

Tax liability in case of a non-corporate taxpayer to whom the provisions of AMT apply

As per the concept of AMT, the tax liability of a non-corporate taxpayer to whom the provisions of AMT apply will be the higher of the following:

• Tax liability computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the taxpayer at the tax rate applicable to him. Tax computed in the above manner can be termed as normal tax liability.

• Tax computed @ 18.5% (plus surcharge and cess as applicable) on adjusted total income. The tax computed by applying 18.5% (plus surcharge and cess as applicable) on adjusted total income is called AMT.

Note:

(1) AMT is levied @ 9% in case of a non-corporate assessee being a unit located in an International Financial Services Centre and deriving its income solely in convertible foreign exchange. Surcharge and cess as applicable will also be levied.

(2) AMT is levied @ 15% in case of a co-operative society

Illustration

The taxable income for the year 2026-27 of Mr Kumar (resident and age 39 years) computed as per the provisions of the Income-tax Act is Rs. 28,40,000. The taxable income has been computed after deduction of Rs. 2,00,000 under section 151 in respect of royalty on books. Will he be liable to AMT? If yes, then what will be his tax liability for the year?

The provisions of AMT shall apply to a non-corporate taxpayer if he has made any claim for deduction under chapter VIII-C (except section 149). Further, the provisions of AMT shall apply to an individual or a Hindu undivided family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person only if the adjusted total income of such person exceeds Rs. 20,00,000. In this case, Mr. Kumar has claimed deduction under section 151 and his adjusted total income exceeds Rs. 20,00,000 and, hence, the provisions of AMT will apply to him.

By applying the provisions of AMT, the tax liability of Mr. Kumar will be higher of the following:

• Tax liability computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the taxpayer by applying the tax rate applicable to him. Tax computed in the above manner can be termed as normal tax liability.

His taxable income is Rs. 28,40,000 and tax on such income by applying the tax rates (old tax regime) applicable to an individual below the age of 60 years for the tax year 2026-27 works out to Rs. 6,64,500. Tax liability after health & education cess of 4% would work out to Rs. 6,91,080.

Adjusted total income will come to Rs. 30,40,000 (Rs. 28,40,000 + Rs. 2,00,000, i.e., deduction under section 151). AMT @ 18.5% on Rs. 30,40,000 will come to Rs. 5,62,400. AMT liability after health & education cess of 4% will come to Rs. 5,84,896.

From the above computation, it can be observed that the liability as per the normal provisions of the Income-tax Act is more than the liability as per the provisions of AMT and, hence, the tax liability of Mr Kumar will be Rs. 6,91,080.

Illustration

The taxable income for the tax year 2026-27 of Mr. Ajay (resident and age 34 years) computed as per the provisions of Income-tax Act is Rs. 20,84,000. The taxable income has been computed after deduction of Rs. 5,00,000 under section 145. Will he be liable to AMT? What will be his tax liability for the year?

The provisions of AMT shall apply to a non-corporate taxpayer if he has made any claim for deduction under chapter VIII-C (except section 149). Further, the provisions of AMT shall apply to an individual or a Hindu undivided family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person only if the adjusted total income of such person exceeds Rs. 20,00,000. In this case, Mr. Ajay has claimed deduction under section 145 and his adjusted total income exceeds Rs. 20,00,000 and, hence, the provisions of AMT would apply to him.

By applying the provisions of AMT, the tax liability of Mr. Ajay will be higher of the following:

• Tax liability computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the taxpayer by the tax rate applicable to him. Tax computed in the above manner can be termed as normal tax liability.

His taxable income is Rs. 20,84,000, tax on Rs. 20,84,000 by applying the tax rates (old tax regime) applicable to an individual below the age of 60 years for the tax year 2027-28 works out to Rs. 4,37,700. Tax liability after health & education cess of 4% would work out to Rs. 4,55,208.

Adjusted total income will come to Rs. 25,84,000 (Rs. 20,84,000 + Rs. 5,00,000, i.e., deduction under section 145). AMT @ 18.5% on Rs. 25,84,000 will come to Rs. 4,78,040. AMT liability after cess of 4% will come to Rs. 4,97,162.

From the above computation, it can be observed that the liability as per the provisions of AMT is more than the liability as per the normal provisions and, hence, the tax liability of Mr Ajay would work out to Rs. 4,97,162 (i.e., as per AMT). The excess tax paid by Mr. Ajay on account of AMT can be claimed as AMT credit and can be carried forward for adjustment to next year(s) [provisions relating to AMT credit are discussed later].

AMT credit

As discussed in the earlier part, a non-corporate taxpayer to whom the provisions of AMT apply has to pay the higher of normal tax liability or liability as per the provisions of AMT. If in any year the taxpayer pays liability as per AMT, then he is entitled to claim credit in the subsequent year(s) of AMT paid above the normal tax liability.

Provided that where the amount of Foreign Tax Credit (‘FTC’) allowed against the AMT exceeds the amount of such FTC admissible against the tax payable by the assessee under normal provisions of the Income-Tax Act, then, while computing the amount of FTC under this sub- section, such excess amount shall be ignored.

Illustration

The tax liability of Essem Enterprises (a partnership firm) for the tax year 2026-27 under the normal provisions of the Income-tax Act is Rs. 8,40,000 and the liability as per the provisions of AMT is Rs. 10,00,000. Will it be entitled to claim any AMT credit in the subsequent year(s)?

A non-corporate taxpayer paying AMT is entitled to claim the credit of AMT paid in excess of normal tax liability. In this case, the liability of Essem Enterprises for the financial year 2026-27 under the normal provisions is Rs. 8,40,000, and as per the provisions of AMT is Rs. 10,00,000 (which is higher than normal tax liability), and hence, the firm has to pay Rs. 10,00,000, i.e., the liability as per AMT provisions.

If in any year, the taxpayer pays liability as per AMT, then it can claim AMT credit of the excess of AMT paid over the normal tax liability. In this case, the liability of AMT is higher; hence, the firm will be entitled to claim AMT credit of Rs. 1,60,000 (being the excess of AMT over normal tax liability of Rs. 8,40,000).

Adjustment of carried forward AMT credit

As discussed earlier, a non-corporate taxpayer to whom the provisions of AMT apply is entitled to claim AMT credit of excess AMT paid over the normal tax liability. The AMT credit can be utilised by the taxpayer in the subsequent year(s). The credit can be adjusted in the year in which the liability of the taxpayer as per the normal provisions is more than the AMT liability. The set-off in respect of the brought-forward AMT credit shall be allowed in the subsequent year(s) to the extent of the difference between the tax on his total income as per the normal provisions and the liability as per the AMT provisions.

Illustration

The tax liability of Essem Enterprises (a partnership firm) for the tax year 2026-27 under the normal provisions of the Income-tax Act is Rs. 18,40,000, and the liability as per the provisions of AMT is Rs. 18,00,000. It has brought forward an AMT credit of Rs. 2,00,000. Can the firm adjust the AMT credit? If yes, then how much and what will be the tax liability of the firm after adjustment of AMT credit?

The AMT credit can be adjusted in the year in which the liability of the non-corporate taxpayer to whom the provisions of AMT apply as per the normal provisions is more than the AMT liability. In this case, the liability as per the normal provisions of the Income-tax Act is Rs. 18,40,000, and the liability as per the provisions of AMT is Rs. 18,00,000. Liability as per the normal provisions is more than liability as per the provisions of AMT and, hence, the firm can adjust the AMT credit.

The set-off in respect of brought forward AMT credit shall be allowed in the subsequent year(s) to the extent of the difference between the tax on his total income as per the normal provisions and the liability as per the AMT provisions. Thus, after set -off of the AMT credit, the liability of the firm cannot be less than the liability as per the provisions of AMT. In this case, the liability as per AMT is Rs. 18,00,000; hence, after claiming set-off of the AMT credit, the liability of the firm cannot be less than Rs. 18,00,000. Hence, out of the credit of Rs. 2,00,000, the firm can claim credit of Rs. 40,000 only, and the balance credit of Rs. 1,60,000 can be carried forward to the next year(s).

Period for which AMT credit can be carried forward

As discussed earlier, a non-corporate taxpayer (to whom the provision of AMT applies) can carry forward the AMT credit for adjustment in subsequent year(s), however, the AMT credit can be carried forward only for a period of 15 tax years after which it will lapse. In other words, if AMT credit cannot be utilised by the non-corporate taxpayer within a period of 15 tax years (immediately succeeding the tax year in which such credit was generated), then such credit will lapse. No interest is paid to the taxpayer in respect of such credit.

Report from Chartered Accountant

Every non-corporate taxpayer to whom the provisions of AMT apply is required to obtain a report from a chartered accountant in Form No. 67 before the date referred to in Section 63(1) [Table S. No. 1(a)].

MCQ on AMT and MAT

Q1.MAT stands for

(a) Minimum Alternate Tax (b) Minimum Allowed Tax

Correct answer : (a)

Justification of correct answer :

MAT stands for Minimum Alternate Tax and AMT stands for Alternate Minimum Tax. Initially

the concept of MAT was introduced for companies, and progressively it has been made applicable to all other taxpayers in the form of AMT.

Thus, option (a) is the correct option.

Q2.AMT stands for

(a) Applicable Minimum Tax (b) Adjustable Minimum Tax

Correct answer : (c)

Justification of correct answer :

MAT stands for Minimum Alternate Tax and AMT stands for Alternate Minimum Tax. Initially, the concept of MAT was introduced for companies, and progressively it has been made applicable to all other taxpayers in the form of AMT.

Thus, option (c) is the correct option.

Q3. As per section 206, every taxpayer being a company is liable to pay MAT if the Income-tax payable on the total income, computed as per the provisions of the Income-tax Act in respect of any year, is less than 15.50% of its book-profit + surcharge (SC) + education cess (EC) + secondary and higher education cess (SHEC).

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

As per section 206, every taxpayer being a company is liable to pay MAT if the Income-tax payable on the total income, computed as per the provisions of the Income-tax Act in respect of any tax year, is less than 14% of its book-profit + surcharge (SC) + health & education cess (HEC).

Thus, the statement given in the question is false, and hence, option (b) is the correct option.

Q4. As per section 206(1)(q), MAT shall not apply to any income accruing or arising to a company from life insurance business referred to in section 194.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

As per section 206(1)(q), MAT shall not apply to any income accruing or arising to a company from life insurance business referred to in section 194.

Thus, the statement given in the question is true, and hence, option (a) is the correct option.

Q5. The provisions of MAT will apply to shipping income liable to tonnage taxation, i.e., tonnage taxation scheme as provided in sections 225 to 235.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

The provisions of MAT will not apply to shipping income liable to tonnage taxation, i.e., tonnage taxation scheme as provided in Schedule XIII-G.

Thus, the statement given in the question is false, and hence, option (b) is the correct option.

Q6. "Book profit" for the purposes of Section 206 means net profit as shown in the statement of profit and loss prepared in accordance with ___________

of the Companies Act as increased and decreased by certain items prescribed in this regard.

(a) Schedule V (b) Schedule III

Correct answer : (b)

Justification of correct answer :

As per Section 206(1)(f), for the purposes of computing ‘book profit’, every company shall prepare its statement of profit and loss for the relevant tax year as per the provisions of Schedule III to the Companies Act, 2013. The net profit as per the statement of profit and loss shall be increased and decreased by certain items prescribed in this regard to compute the book profit.

Thus, option (b) is the correct option.

Q7. If in any year the company pays liability as per MAT, then it is entitled to claim credit of MAT paid over and above the normal tax liability in the subsequent year(s).

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

Thus, the statement given in the question is flase and hence, option (b) is the correct option.

Q8. In case of a non-corporate taxpayer, AMT is levied @ % of adjusted total income.

(a) 20.00 (b) 18.50

Correct answer : (b)

Justification of correct answer :

In case of a non-corporate taxpayer, AMT is levied @ 18.5% of adjusted total income

Thus, option (b) is the correct option.

Q9. Every non-corporate taxpayer to whom the provisions of AMT apply is required to obtain a report from a chartered accountant in Form No. on or before the due date of filing the return of income

(a) 65 (b) 68

Correct answer : (d)

Justification of correct answer :

Every non-corporate taxpayer to whom the provisions of AMT apply is required to obtain a report from a chartered accountant in Form No. 67 on or before the due date of filing the return of income.

Thus, option (d) is the correct option.

MAT and AMT

Footnotes