26 May 2020
Minimum Alternative Tax is payable under the Income Tax Act. 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 with the introduction of MAT, the companies have to pay a fixed percentage of their profits as Minimum Alternate Tax. MAT is applicable to all companies, including foreign companies.
MAT is calculated under Section 115JB of the Income-tax Act. Every company should pay higherof the tax calculated under the following two provisions:
1. Tax liability as per the Normal provisions of income tax act(tax rate 30% plus 4% Edu cess plus surcharge (if applicable)
TAX LIABILITY AS PER THE NORMAL PROVISIONS OF THE INCOME TAX ACT WHOSE TURNOVER OR GROSS RECEIPTS WAS OF Rs. 250Cr DURING THE FY 2016-17.(TAX RATE 25% PLUS 4%EDUCATION CESS PLUS SURCHARGE(IF APPLICABLE)
2. Tax liability as per the MAT provisions are given in Sec 115JB(18.5 % of Book Profits Plus 4 % education cess plus a surcharge if applicable). The tax rate is 15% with effect from AY 2020-21 (FY 2019-20)
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