MINIMUM ALTERNATE TAX 1 Prepared by PAMS ASSOCIATES

MINIMUM ALTERNATE TAX 1 Prepared by PAMS & ASSOCIATES

HISTORY OF MAT Reliance Industries Limited (RIL) was one of the main factor which led to the introduction of MAT. Introduced in the Finance Act, 1996 by the finance minister Mr. P. Chidambaram. MAT was introduced for the Zero Tax companies & companies paying marginal Tax. 2

MINIMUM ALTERNATE TAX It is a form of Income Tax. It’s levied on companies only i. e. Pvt. Ltd. & Ltd. Charging Section of MAT is Section 115 JB (1) of Income tax act, 1961. 3

UNDERSTANDING OF MAT 4

PROFIT : SHOWN TO SHAREHOLDERS 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Profit Expenses 5 Turnover

PROFIT AS PER INCOME TAX LAWS 100% : 90% 80% Establishment in specified Areas Scentific Improvements 70% 60% 50% Agricultural Improvement Profit 40% 30% Expenses 20% 10% 6 0% Turnover

PROFIT COMPARISON CHART : 100% 90% Establishment in specified Areas Scentific Improvements 80% 70% 60% Agricultural Improvement 50% Profit 40% 30% Expenses 20% 10% 7 0% Turnover

EXAMPLE ABC Ltd has shown following profits during the A. Y. 2016 -17: Profit as per P&L A/C PGBP as per Income Tax Rate of MAT Rs. 1, 500 Cr. Rs. 100 Cr. 30% 18. 5% Now Income Tax as per PGBP computation will be : Rs. 100 Cr. * 30% = Rs. 30 Cr. However Government was expecting tax on Rs. 1, 500 Cr of Profit 8

EXAMPLE Therefore, after implication of MAT, Company will have to pay : Income Tax on PGBP i. e. Rs. 30 Cr. Higher OR MAT on Profit as per P&L A/C i. e. Rs. 1, 500 Cr. * 18. 5% = Rs. 277. 5 Cr. Thus company will have to Pay Rs. 277. 5 Cr. 9

SEC 115 JB (1) Notwithstanding anything contained in any other provisions of the Income Tax act Wherein the case of a company The income tax payable on the total income as computed under the Income Tax Act. Is less than 18. 5% of it’s book profits Such book profits shall be deemed to be the total income of the assesse. And tax payable on such total income shall be the amount of income tax at the rate of 18. 5%. 10

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 11