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MAT

Vipul Kayasth (SERVICE) (24 Points)

07 December 2007

CAN ANYBODY EXPLAIN ME ABOUT MAT IN DETAIL

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4 Replies

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 07 December 2007

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Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 07 December 2007

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Ankit Dangayach (Chartered Accountant) (691 Points)
Replied 08 December 2007

MAT stands for Minimum Alternate tax which is paid by a COMPANY(Both Domestic& Foreign) if the income tax payable on total income of the company as per NORMAL provisions of the act is less than 10 % of its BOOK PROFIT.In this case book profits are deemed to be total income of the company and company shall be liable to pay 10%(+SURCHARGE+EDUCATION CESS) of book profit as tax for that YEAR.The EXCESS TAX (i.e MAT-Tax as per normal provisions) so paid over normal profit for that year shall be allowed as credit for reducing tax liability in Future years .But such tax credit can be carried forward for MAXIMUM 7 Assessment Years only.Thus MAT is the minimum amount of tax to be paid by a comapny.Book Profits are calculated as per Sec 115JB. Eg IF Book profit calculated as per provisions of sec 115JB For AY 2007-08 is Rs 100. Normal Income on which company is liable to pay tax at 30% is 20. Tax payable on total income is Rs6 while tax calculated as per MAT is Rs 10.Thus we have to pay RS 10 as Tax for the current A.Y and excess tax of RS 4(MAT TAX -Normal TAX on total income)shall be carry forward as TAX Credit for 7 A.Y and shall reduce tax liablity in future if such tax liabilty is payable as per normal provisions of the Act. Suppose Book Profit for 2008-09 is 150 while normal income is 100 . In this case tax as per MAT calculation is less if compared to tax on total income. so tax liability for AY-2008-09 is Rs 30 (30% of Rs 100) So For A.Y 2008-09 company has to pay Rs 26(30 - 04 ).