What Is Mat Tax Credit

Tax liability of a company for fy 2019 20 under normal provisions of the income tax act is rs.

What is mat tax credit. With mat companies have to pay up a minimum amount of tax to the government. When mat for a company is greater than its normal tax liability the difference between the mat and normal tax liability is called mat credit. It was introduced in the year 1987 and. However the increase in mat rates over the years has made it extremely difficult for companies to avail their mat credit even though the carry forward period.

What is mat credit. This mat credit can be carried forward and set off for 10 consecutive assessment years succeeding the year in which the tax credit first accrued. If during a year a company has paid tax liability as per mat it is entitled to claim credit of excess of mat paid over the normal tax liability in the following year s. One can find provisions relating to carry forward and adjustment of mat credit in section 115jaa.

In india mat is levied under section 115jb of the income tax act 1961. Tax paid as per mat calculation income tax payable under normal provision of income tax act 1961. Such excess of tax credit is allowed to be carried forward and set off in the financial year in which the company is liable to pay tax under the general provisions of the income tax act. A new tax credit scheme is introduced by which mat paid can be carried forward for set off against regular tax payable during the subsequent seven year period subject to certain conditions as under when a company pays tax under mat the tax credit earned by it shall be an amount which is the difference between the amount payable.