MAT CREDIT ENTRIES
This query is : Resolved
11 November 2008
Can any one give me the entries by which MAT CREDIT is created, where normal tax is less than tax under MAT. And how it can be adjusted where normal tax(under tax laws) excess of MAT in later year.
(Entries which also involve provision for tax A/c)
And also give entries if Deferred tax is invovled.(in both cases ie DTA/DTL)
Thank Q
(Entries which also involve provision for tax A/c)
And also give entries if Deferred tax is invovled.(in both cases ie DTA/DTL)
Thank Q
11 November 2008
You should not in my opinion creat MAT entries in anticipation of adjustments. MAT credit is outside the books.
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11 November 2008
but i have find this data: from source caalley.com. Are the entries mentioned there not relect in the books?
please clarify me
Analysis of Guidance Note on MAT Credit
[Submitted by Mr.V.M.V.Subba Rao
B.Com. F.C.A. D.I.S.A(ICA),MICA
Nellore]
March 27, 2006
The MAT credit is available in respect of MAT paid under Section 115JB of the Income-tax Act with effect from assessment year 2006-07.
The amount of MAT credit would be equal to the excess of MAT over normal income-tax for the assessment year for which MAT is paid.
The MAT Credit so determined can be carried forward for set-off for five succeeding years from the year in which MAT credit becomes allowable (Proposed Amendment in Finance Act, 2006- 7 years).
The amount of MAT credit can be set-off only in the year in which the company is liable to pay tax as per the normal provisions of the Act and such tax is in excess of MAT for that year.
The amount of set-off would be to the extent of excess of normal income-tax over the amount of MAT.
It is not appropriate to consider MAT credit as a deferred tax asset for the purposes of Accounting Standard -22 (Accounting for Taxes on Income)
Although MAT credit is not a deferred tax asset under AS-22, but it can be considered as an "asset" and the same should be presented under the head "LOANS AND ADVANCES" considering it is of the nature of a pre-paid tax.
The MAT credit may be reflected as "MAT CREDIT ENTITLEMENT A/c"
The following entry is to be passed for recognizing the MAT credit as Asset:
MAT Credit Entitlement A/c Dr.
To Profit and Loss A/c
While availing the MAT Credit, the following entry is to be passed:
Provision for Taxation A/c Dr
To MAT Credit Entitlement A/c
MAT credit should be reviewed at each balance sheet date.
While writing down the carrying amount of MAT Credit entitlement, the following entry is to be passed:
Profit and Loss A/c Dr.
To MAT Credit Entitlement A/c
The difference between MAT paid and MAT Credit Entitlement can be treated as tax paid during the year.
please clarify me
Analysis of Guidance Note on MAT Credit
[Submitted by Mr.V.M.V.Subba Rao
B.Com. F.C.A. D.I.S.A(ICA),MICA
Nellore]
March 27, 2006
The MAT credit is available in respect of MAT paid under Section 115JB of the Income-tax Act with effect from assessment year 2006-07.
The amount of MAT credit would be equal to the excess of MAT over normal income-tax for the assessment year for which MAT is paid.
The MAT Credit so determined can be carried forward for set-off for five succeeding years from the year in which MAT credit becomes allowable (Proposed Amendment in Finance Act, 2006- 7 years).
The amount of MAT credit can be set-off only in the year in which the company is liable to pay tax as per the normal provisions of the Act and such tax is in excess of MAT for that year.
The amount of set-off would be to the extent of excess of normal income-tax over the amount of MAT.
It is not appropriate to consider MAT credit as a deferred tax asset for the purposes of Accounting Standard -22 (Accounting for Taxes on Income)
Although MAT credit is not a deferred tax asset under AS-22, but it can be considered as an "asset" and the same should be presented under the head "LOANS AND ADVANCES" considering it is of the nature of a pre-paid tax.
The MAT credit may be reflected as "MAT CREDIT ENTITLEMENT A/c"
The following entry is to be passed for recognizing the MAT credit as Asset:
MAT Credit Entitlement A/c Dr.
To Profit and Loss A/c
While availing the MAT Credit, the following entry is to be passed:
Provision for Taxation A/c Dr
To MAT Credit Entitlement A/c
MAT credit should be reviewed at each balance sheet date.
While writing down the carrying amount of MAT Credit entitlement, the following entry is to be passed:
Profit and Loss A/c Dr.
To MAT Credit Entitlement A/c
The difference between MAT paid and MAT Credit Entitlement can be treated as tax paid during the year.
11 November 2008
please verify the above
11 November 2008
My only question is if the company is on MAT continuously for a period more than five years, what happens?
12 November 2008
But my question is what are the entries to be made in the books as if the company have expected profits(which are inexcess of MAT profitie book profit )
That too i need entries which involve provision for tax also.
That too i need entries which involve provision for tax also.
12 November 2008
Entries are not passed on 'expected' basis, rather on actual basis. I think prudence and conservatism demands to keep these entries which are contigent upon ifs and buts away from books on a memoeandum basis.
13 November 2008
ok thank Q sir
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