What Is Mat In Income Tax

Tax computed as per the normal provisions of the income tax law i e by applying the relevant tax rate to the taxable income of the company.

What is mat in income tax. Mat a brief introduction. Due to increase in the number of zero tax paying companies mat was introduced by the finance act 1987 with effect from assessment year 1988 89. The concept of mat was introduced to target those companies that make huge profits and pay the dividend to their shareholders but pay no minimal tax under the normal provisions of the income tax act by taking advantage of the various deductions and exemptions allowed under the act. But here only mat on company s u s 115jb is discussed.

It was first introduced by the finance act 1987 and made effective from ay 1988 89. Later it was withdrawn by the finance act 1990 but reintroduced again from 1 april 1997. In india mat is levied under section 115jb of the income tax act 1961. Minimum alternative tax is payable under the income tax act.

Under the provisions of section 115jb where the income tax calculated under the income tax act is less than 18 5 of the book profit then such book profit shall be deemed to the total income of the assessee and tax payable by the assessee shall be 18 5 on book profits. Companies find various loop holes to avoid paying income tax by using several exemptions. As per the current tax provision of the income tax act 1961 minimum alternate tax mat are levied only on companies and alternate minimum tax amt on limited liability partnerships llps. Mat is a way of making companies pay a minimum amount of tax.

Mat is similar to an advance tax. Mat credit is the difference between the tax the company pays under mat and the regular tax. No such tax is levied on other form of businesses such as partnership firms sole proprietorship association of person etc. Jun 07 2018 10 06 ist.

It is allowed to be carried forward for a period of 15 financial years. Mat is a tax levied under section 115jb of the income tax act 1961. All companies are required to pay corporate tax based on which is higher of the following. The concept of mat credit was re introduced in 2005 with a carry forward mechanism of five years.

Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987 vide section 115j of the income tax act 1961 it act to facilitate the taxation of zero tax companies i e those companies which show zero or negligible income to avoid tax under mat such companies are made liable to pay to the government by deeming a certain percentage of their book. Mat is calculated at 15 of the book profit as per section 115jb of income tax act 1961.