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MAT Tax

Divya.M (CA Final Student) (274 Points)

24 February 2010

Can anyboby explain me abt MAT Tx an wen it is applicable on a company. at wat rate it is calculated???

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Rachit (Analyst) (913 Points)
Replied 24 February 2010

Book Profits are liable to tax u/s.115JB in respect of income of companies as Minimum Alternate Tax ("MAT"). Thus, companies which were earlier not liable to tax on account of depreciation and other deductions as per Income-tax Act are now liable to pay tax under Minimum Alternate Tax ("MAT"). The provisions regarding book profits tax ("MAT") not applicable to companies engaged in Power Generation and Infrastructure sectors.

For Assessment year 2010-11 MAT rate has been increased to 15%. The effective MAT rate including surcharge and cess would therefore be 16.995%.

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CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 24 February 2010

Good job rachit... I mean, it was quite summarised form of the concept

Ameet (L) (1678 Points)
Replied 24 February 2010

Normally, a comapny is liable to pay tax on the income computed in accordance with the provisions of the income tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. Inorder to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98.

According to this section, if the taxable income of a company computed under this Act, in respect of previous year is less than 30 % of its book profits, the total income of such company is chargeable to tax for the relevant previous year shall be deemed to an amount equal to 30 % of such book profits.

A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under:-

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 regular tax. Tegular tax in this case means the tax payable on the basis of normal computation of total income of the company.
MAT credit will be allowed carry forward facility for a period of five assessment years immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT credit will be allowed to be accumulated subject to the five year carry forward limit.
In the assessment year when regular tax becomes payable, the difference between the regular tax and the tax computed under MAT for that year will be set off against the MAT credit available.
The credit allowed will not bear any interest.

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Divya.M (CA Final Student) (274 Points)
Replied 24 February 2010

But Rachit from AY 2010-11 ther'll be no Surcharge. but u said Surcharge is ther???

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 24 February 2010

Surcharge applicable only if book profits exceed Rs. 1 crore. If book profits less than Rs. 1 Cr then no surcharge applicable.

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Divya.M (CA Final Student) (274 Points)
Replied 24 February 2010

Originally posted by : Aditya Maheshwari
	Surcharge applicable only if book profits exceed Rs. 1 crore. If book profits less than Rs. 1 Cr then no surcharge applicable.