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MAT credit entitlement

Divya Priya (student) (333 Points)

26 February 2020

What is MAT credit entitlement and its accounting treatment?

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prasad Nilugal ( GST Practitioner & Accounts ) (14801 Points)
Replied 26 February 2020

Mat Credit entitlement means , If Your Income Tax liability as per normal provisions of the Income Tax is less than provisions of MAT then company has to pay higher Income Tax ,in this case when company pays excess of Income Tax then normal provision then excess paid amount is available as Mat Credit .

This I will explain with Example

A Ltd in financial year 2018-19 Income Tax liability as per normal provision is 8,40,000/- and as per Mat provision 10,00,000/- so as per rule company paying 100000/- as higher income Tax . So Credit of 1,60,000 is available in subsequent years .( 10,00,00 - 8,40,000)

In Next Year Normal provision Income Tax liability was 18,40,000/- and as per Mat 18,00,000/- so higher we have to pay ,then you can utilize only 40,000/- Mat credit of earlier year out of 160000/- and pay 18,00,000/- out of 18,40,000/- , because current income tax liability should be less than Mat amount .