Minimum Alternate Tax
Scheme of Minimum Alternate Tax
As per section
115JB(1), every company shall liable to pay a Minimum Alternate Tax. If
its tax
on total income, computed at the normal rate, is less than
10% of its book profit, such book profit shall be deemed to be the
total income of the assessee and the tax payable by the company shall
be 10% (from Assessment Year 2010-11 - 15%, 18% for AY 2011-12) on such
book profit, i.e.,
a company shall pay higher of the following as income-tax each year: -
- Tax on Total Income (hereinafter 'normal tax')
- 10% (or 15% or 18%) of Book Profits
(hereinafter MAT or Minimum Alternate Tax)
However, the
provisions of MAT
shall not apply in relation to the income accrued or arising on or
after 01.04.2006, from any business carried on, or any services
rendered, by an entrepreneur or a Developer, in a Unit or Special
Economic Zone - section 115JB(6).
Where MAT has
been paid for AY 2006-2007 or thereafter, then Tax Credit shall be allowed,
as per section 115JAA, to such company as under: -
- The amount
of tax credit available for set-off
in future assessment years shall be the difference between the minimum
alternate tax paid and the normal tax that would have been payable.
However, no interest on minimum alternate tax is available.
- Such tax
credit available shall be carried
forward for set-off against normal tax payable in future assessment
years. However, no such tax credit shall be eligible for set-off after
the seventh assessment year from the end of the relevant assessment
year from which the tax credit available is being carried forward.
- Set-off of
tax credit available shall be
allowed in any of the aforesaid seven assessment years to the extent of
the difference between the normal tax payable and the minimum alternate
tax payable. This implies that set-off is available only in those
assessment years, where the normal tax payable is more than the minimum
alternate tax payable.
- Where as a
result of an order under sections
143(1), 143(3), 144, 147, 154, 155, 245D(4), 250, 254, 260, 262, 263 or
264, the amount of tax payable under the Act is increased or reduced,
then the amount of tax credit allowed shall also be increased or
reduced accordingly.
Preparation of Financial Statements
Every company,
for the purpose of section
115JB(1), shall prepare its profit and loss account for the relevant
previous year in accordance with the provisions of Parts II and III of
Schedule VI to the Companies Act, 1956.
The (i)
accounting policies followed, (ii)
accounting standards adopted for preparing such accounts including
profit and loss account and (iii) method and rates adopted for
calculating the depreciation, that has been followed while preparing
the accounts (including profit and loss account) laid before the
company at its annual general meeting in accordance with the provisions
of section 210 of the Companies Act, 1956, shall be the same while
preparing the annual accounts, including profit and loss account, of
the company for the purpose of section 115JB.
Even, where
the company adopts or has adopted a
financial year under the Companies Act, 1956, which is different from
the previous year under this Act, the (i) accounting policies followed,
(ii) accounting standards adopted for preparing such accounts including
profit and loss account and (iii) method and rates adopted for
calculating the depreciation, that has been followed while preparing
the accounts (including profit and loss account), for the financial
year of the company, and laid before the company at its annual general
meeting in accordance with the provisions of section 210 of the
Companies Act, 1956, shall be the same while preparing the annual
accounts, including profit and loss account, of the company for the
purpose of section 115JB, for the previous year relevant to that
financial year.
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