1 crore + (Total Income – Rs. A tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent fifteen years period subject to certain conditions, as under:-. Note: MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange. 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 under MAT and the normal tax. 1 crore + (Total Income – Rs. A company is entitled to claim MAT credit i.e. Copyright © TaxGuru. 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 under MAT and the normal tax. The credit of MAT can be utilized by the company in the subsequent year(s). MAT credit can be better explained with the help of an illustration. 2 Lacs or More under Income Tax, Extension of date of Filing of Accounts to Charity Commissioner in Maharashtra, Show Cause Notices to Taxpayers Under GST Act Mandatory to Upload on Website – Mere E-Mail is not Suffice, New GST Return Scheme for Small Taxpayers, Representation to FM to Widen Scope of Benefit of 20% for flats, A Practical Approach to TDS & TCS (Amended upto 31.10.2020), the assessee is a resident of a country or a specified territory with which India has an agreement referred to in sub-section (1) of section 90 or the Central Government has adopted any agreement under sub-section (1) of section 90A and the assessee does not have a permanent establishment in India in accordance with the provisions of such agreement; or [As amended by Finance Act, 2017]. Income tax Payable shall be the higher of the following amounts: Let us understand with an example: Sanyam Ltd. has given you the following figures to calculate the tax payable for Assessment Year 2019-20. 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. Now after the insertion of Minimum Alternate Tax Provisions companies have to pay a particular amount of tax termed as MAT, so they come under the tax net under section 115JB. No interest is paid to the taxpayer in respect of such credit. As per Explanation 1 to section 115JB(2) “book profit” for the purposes of section 115JB means net profit as shown in the statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013 as increased and decreased by certain items: Computation of Book Profit with Practical examples will discuss in Article no. So let’s try to understand it with the help of an example: As mention above Computation of Book Profit along with various practical examples and its applicability on IND AS will discuss in Article No. To add to the complexity, in provinces that charge GST/PST, some items are exempt from the GST but not from the PST and vice versa (if in doubt, check the provincial sales tax information bulletins for Quebec, Manitoba, Saskatchewan, and British Columbia). Computed as per the provisions of Income-tax Act is Rs. Tax Paid for the relevant assessment year cannot be less then tax computer in column, Credit can be allowed to be adjusted to the maximum extent of total credit available. c) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge. Connect With Me : Thus, the tax liability of Sohrab Spinning Mills Ltd. will be Rs. MAT credit will be allowed carry forward facility for a period of 15 assessment years immediately succeeding the assessment year in which MAT is paid. The credit allowed will not bear any interest. Under a MAT structure, the general annual grant (GAG) in respect of each academy would be received by the MAT and would be under the control of the trustees. Since the 2014 DfE model funding agreement documentation was published, GAG received by a MAT can be 'pooled', i.e. Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company. b) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge. Tax payable @ 18.5% + Surcharge @ 7% – 19.795% of ₹ 1,01,00,000 = ₹ 19,99,295. Book profit of the company computed as per the provisions of section 115JB is Rs. 2,52,000 (plus cess). 13,00,000. (ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees. Is MAT credit restricted only to difference between MAT @18.5% and Normal Tax @ 25% or 250 crore. MAT credit will be allowed to carry forward facility for a period of 10 assessment years immediately succeeding the assessment year in which MAT is paid. TR is listed in the World's largest and most authoritative dictionary database of abbreviations and acronyms The Free Dictionary First of all calculate tax as per normal provisions of Income Tax, Now compute tax payable as per MAT provisions, Hence, Tax Payable by Company before marginal relief = Rs. Now after the insertion of Minimum Alternate Tax Provisions companies have to pay a particular amount of tax termed as MAT, so they come under the tax net … No Marginal Relief, since the income does not exceed Rs. Education Cess: 4% on Tax Payable + Surcharge. Since Income Exceeds Rs. Subscribe to our mailing list and get interesting stuff and updates to your email inbox. 14. What will be the tax liability of Shreyan Paper Mills Ltd. (ignore cess and surcharge)? Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but who were not contributing to the Govt by way of corporate tax, by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage of book profit as minimum alternate tax. MAT credit can be better explained with the help of an illustration. Report from chartered accountant : Every company to whom the provisions of section 115JB applies is required to obtain a report from a chartered accountant in Form No. 7,78,580 before marginal relief, which can be carried forward to 15 assessment years. Your email address will not be published. Adjustment of carried forward MAT credit: Period for which MAT credit can be carried forward: SC directs income tax dept to refund Rs. Maximum Alternate Tax. 1 crore)}, Tax on total income computer under MAT provisions (at present 18.5% + cess), Add Surcharge: If total income exceeds Rs. TaxGuru.in really helps us learn something new everyday. 1,01,00,000, Tax Payable @ 25% plus edu cess of 4% – 26% of 50,00,000 = Rs. No interest is payable on the tax credit available under section 115JAA.