MInimum Alternate Tax and Alternate Minimum Tax (115JB and 115JC)

It provides overview and explanation with respect to the complexity of Section 115JB and 115JC of Income Tax Act 1961.
It also provides explanation with respect to calculation of book profits.

1. MINIMUM ALTERNATE TAX[115JB],
AND
ALTERNATE MINIMUM TAX[115JC]
-(AN OVERVIEW)
Mr. Nikhil S Gupta
Kosho moolo
Dandah
(Revenue is the root
of administration)
-
Kautilya’s Arthashastra

2. 04-06-2017Mr. Nikhil.S.Gupta
“It was only for the good of his subjects that he collected taxes
from them, just as the sun draws moisture from the Earth to give
it back a thousand fold””
-
Kalidasa in “Raghuvanshi” praising King Dilipa

3. Sr.NoParticulars
A MiniMuM AlternAte tAx
1 Introduction
2 Objectives
3 Applicability and Non Applicability
4 Basic Provision
5 Book Profit
6 MAT credit and Report From Chartered Accountant
B AlternAte MiniMuM tAx
1 Introduction
2 Applicability
3 Rate of AMT
4 Steps to calculate adjusted total income(ATI)
5 Calculation of AMT
6 AMT Creditand Report From Chartered Accountant

4. MINIMUM ALTERNATE TAX
SECTION 115JB AND RELEVANT PROVISIONS OF THE
INCOME TAX ACT 1961.
Mr. Nikhil S Gupta

5. 04-06-2017Mr. Nikhil.S.Gupta
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INTRODUCTION
Finance Act 1987 introduced MAT with effect from
AY-1988-1989.
Lateron it was
withdrawn by
Finance Act 1990
Reintroduced by Finance Act (no 2) Act 1996
w.e.f 1-4-1997

6. OBJECTIVE OF MAT(MINIMUM ALTERNATE TAX)
•At times it may happen that a taxpayer, being a company, may have generated income
during the year, but by taking the advantage of various provisions of Income-tax Law
(like exemptions, deductions, depreciation, etc.), it may have reduced its tax liability or
may not have paid any tax at all
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•At times it may happen that a taxpayer, being a company, may have generated income
during the year, but by taking the advantage of various provisions of Income-tax Law
(like exemptions, deductions, depreciation, etc.), it may have reduced its tax liability or
may not have paid any tax at all.

7. 04-06-2017Mr. Nikhil.S.Gupta
•
Zero tax companies
•Thus companies were showing profits in books and also paying out dividends,
however, not paying tax/marginal tax on account of various incentives( for example:
incentives under chapter VIA-C –in relation to certain incomes, etc). Therefore,
Government wanted to get some tax from these companies also.

8. 04-06-2017Mr. Nikhil.S.Gupta
Companies Earning Substantial
Profits and Providing Handsome
Dividends.
But due to exemptions and
deductions available , pay
negligible or nil taxes to IT
To bring them in tax net, MAT is applied

9. APPLICABILITY AND NON-APPLICABILITY OF MAT
•As per section 115JB, 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 18.50% of
its book-profit + surcharge (SC) + education cess (EC) + secondary and higher
education cess.
•From the above it can be observed that the provisions of MAT are applicable to
every company whether public or private and whether Indian or foreign.
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•
However,
as per section 115JB(5A) MAT shall not apply to any income accruing
or arising to a company from life insurance business referred to in section 115B.
Further, as per provisions of Section 115V-O the provisions of MAT will not apply to
a shipping income liable to tonnage taxation, i.e., tonnage taxation scheme as
provided in section 115V to 115VZC

11. 04-06-2017Mr. Nikhil.S.Gupta
Companies Incorporated under
Companies Act 2013
Section 25 Companies (Travel Agents Association of
India V/s ACIT)
W.r.e.f 01.04.2001by Finance Act 2016
A foreign Company:
-Being Resident of DTAA country with no PE in India
-Being resident of Non-DTAA country and who is not
required to seek registration under any law in force in India
Shipping Income Covered under Tonnage Tax Scheme
Companies Incorporated deriving income under Life
Insurance Business
Applicable
NotApplicable

12. BASIC PROVISIONS
•As per the concept of MAT, the tax liability of a company will be 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 above manner can be termed as normal tax liability.
•Tax computed @ 18.5% (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 18.5% (plus surcharge and cess as applicable) on book profit is called MAT
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13. Computation of MAT
Step Procedure
1ComputeTotalIncomeunderIncomeTaxAct,1961.
2ComputeBookProfitu/s115JB.
3ComputetaxonTotalIncomeatratesapplicableforCompaniesunder
IncomeTaxAct.
4Compute Tax at 18.5% on Book Profit.
5Tax payable = Higher of Step 3 or Step 4

14. NUMERICAL EXAMPLE
Applicable when assessee paid tax on Book Profit
Step 1Tax on Book Profit (18.5% of 20,00,000)= Rs.3,81,100
Step 2Tax on Total Income (30% of 10,00,000) = Rs.3,00,000
Step 3Step 1 > Step 2
MAT is payable
Total Income Rs.10,00,000
Book Profit Rs.20,00,000

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The book profit shall mean the net profit as shown in the P&L
account/statement is to be prepared in accordance with Schedule III of
Companies Act, 2013(earlier Schedule VI of the companies Act, 1956);
exception for banking, insurance, power generation companies, etc
BOOK PROFIT

16. Book Profit
ADDITIONS (If debited
earlier)
1)Income-taxpaidorpayable,andtheprovisiontherefore
2)Theamountscarriedtoanyreserves,bywhatevername(Reservefor
expense,excessprovision&etc.)
3) Provisionsforunascertainedliabilities(likeProvisionforbaddebts)
4)Provisionforlossofsubsidiarycompanies
5)Dividendspaidorproposed
6)Expenditurerelatedtoexemptincomesu/s10/11/12[except10(38)]
7)Depreciationamount
8)Amountofdeferredtaxandtheprovisiontherefore

17. Book Profit
.
DEDUCTIONS (If credited
earlier)
1)Amountwithdrawnfromanyreserveorprovision
2)Income exempt u/s 10/ 11/ 12 [except 10(38)]
3)Theamountwithdrawnfromrevaluationreserveandcreditedtotheprofitand
lossaccount,totheextentitdoesnotexceedtheamountofdepreciationon
revaluationofasset.
4)Theamountoflossbroughtforwardorunabsorbeddepreciation,whicheveris
lessasperbooksofaccount
5)Theamountofdeferredtax,ifanysuchamountiscreditedtotheprofitand
lossaccount

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•In a given assessing year, when a company pays under the MAT
provision as opposed to the general provisions of the Act, the excess
of tax paid over and above the tax payable under the general
provisions of the Act, accrues as a Tax Credit to the company
•MAT Credit = Tax as per MAT –Normal Tax Liability
•This tax credit is allowed to be carried forward fortenassessment
years succeeding the assessment year in which the credit became
allowable
MAT CREDIT

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•Every company to whom the provisions of section 115JB applies is
required to obtain a report from a chartered accountant in Form No.
29B certifying that the book profit has been computed in accordance
with the provisions of section 115JB.
•The report should be obtained on or before due date of filing the
return of income.
•Audit report in Form No. 29B shall be filed electronically
REPORT FROM CHARTERED ACCOUNTANT

20. Government has decided that FPIs will not be liable for MAT in respect
of income arising after 1
st
April,2015

21. ALTERNATE MINIMUM TAX
SECTION 115JC AND RELEVANT PROVISIONS OF THE
INCOME TAX ACT 1961.
Mr. Nikhil S Gupta

22. 04-06-2017Mr. Nikhil.S.Gupta
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INTRODUCTION
Finance Act 2012 introduced Chapter XII-BA
whereby AMT was made applicable to
LLP’s from AY 2012-
2013.
Later on also made applicable to “Persons
other than corporate assesse” from AY
2013-2014

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APPLICABILITY OF AMT
Applicability of AMT
LLP
Always
Applicable
Individual, Firms, AOP, BOI,
Artificial Juridical Person
If the Adjusted Total Income
Exceeds 20 Lakhs.
•The provision of AMT will
apply to every non-
Corporate tax payer who has
claimed.
•Deduction under section 80H
to 80RRB (except 80P)
•Deduction under section
35AD
•Deduction under section
10AA.

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RATE OF AMT
ATI liable to income-tax at the rate of 18.5% (as increased by surcharge
and cess as applicable ) if tax payable under normal provisions is less
than 18.5% of ATI.

25. STEPS TO CALCULATE ADJUSTED TOTAL INCOME(ATI)
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Step Procedure
1Taxableincomeofthetaxpayer
2Add:Deductionsclaimedundersection80Hto80RRBexcept
(80P)intaxableincome.
3Add:Deductionsclaimedu/s35ADnetoffdepreciationu/s32in
taxableincome
4Add: Deductions claimed u/s 10AA in taxable income
5Adjusted Total Income (1+2+3+4)

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CALCULATION OF AMT
Tax on total Income as per
Income Tax Act 1961
Tax on Adjusted total income
on basis of 18.5% tax.
Whichever
is higher

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•AMT credit shall be allowed for next 10 consecutive years.
•Credit can be set off only in the year in which the regular tax payable exceeds the
AMT.
•Credit of AMT is available even in a year where no deduction is claimed under
Chapter 80H to 80RRB except (80P)
Section 10AA
Section 35 AD
Adjusted Total Income of Specified Tax payers is below 20 lakhs
AMT CREDIT

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•Every company to whom the provisions of section 115JC applies is
required to obtain a report from a chartered accountant in Form No.
29C certifying that the book profit has been computed in accordance
with the provisions of section 115JC.
•The report should be obtained on or before due date of filing the
return of income.
•Audit report in Form No. 29C shall be filed electronically
REPORT FROM CHARTERED ACCOUNTANT

29. If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk, I'll tax your feet
-The Beatles

30. 04-06-2017Mr. Nikhil.S.Gupta
•DisclAiMer
•The information contained herein is of a general nature and is not
intended to address the circumstances of any particular individual or
entity.
•Although we endeavour to provide accurate and timely information,
there can be no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate in the future.
•No one should act on such information without appropriate
professional advice after a thorough examination of the particular
situation.
•The Author of this presentation can be contacted via email id or
mobile ([email protected], 7208568515)