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What is minimum alternate tax?

Open uri20170510 32134 ughyv5?1494421703 gunesh asked over 2 years ago

Hi I am CA student. I want to know about income tax. Can I know, What is minimum alternate tax? ​

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10 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered over 2 years ago

MAT is a tax levied under Income Tax Act of India, 1961. For Example: There are several “zero tax companies” that book high profit but pay almost nil taxes by rolling out substantial dividends to their shareholders.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 utkarsh answered over 2 years ago

Under the provisions of the **Minimum Alternate Tax Act**, as per **section 115JB,** every company domestic or foreign is required to pay MAT. The rule was put to practice so as to ensure that no taxpayer with substantial economic income gets to avoid significant tax liability on account of various exclusions, deductions and credits. Its a tax levied under Income Tax Act,1961.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered over 2 years ago

The Minimum Alternate Tax ("MAT") is a tax levied under India's Income Tax Act of 1961 that targets companies that show profits on their books and declare dividends, but pay minimal or no tax.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

Companies find various loop-holes to avoid paying income tax by using several exemptions. MAT is a way of making companies pay a minimum amount of tax Albert Einstein once said that the hardest thing in the world to understand is income tax. The statement rings true as tax laws are quite complicated and requires a great deal of time and effort to understand them. Most of us get by with a basic understanding of tax matters.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 HIMANSHU answered over 2 years ago

Applicability and non-applicability of MAT As per section 115JB, every taxpayer being a company is liable to pay MAT, if the Income-tax(including surcharge and cess) payable on the total income, computed as per the provisions of the Income-tax Act in respect of any year is less than 18.50% of its book-profit + surcharge (SC) + education cess (EC) + secondary and higher education cess. From the above it can be observed that the provisions of MAT are applicable to every company whether public or private and whether Indian or foreign. However, as per section 115JB(5A) MAT shall not apply to any income accruing or arising to a company from life insurance business referred to in section 115B. Further, as per provisions of Section 115V-O the provisions of MAT will not apply to a shipping income liable to tonnage taxation,

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Mukesh answered over 2 years ago

Applicability and non-applicability of MAT As per section 115JB, every taxpayer being a company is liable to pay MAT, if the Income-tax(including surcharge and cess) payable on the total income, computed as per the provisions of the Income-tax Act in respect of any year is less than 18.50% of its book-profit + surcharge (SC) + education cess (EC) + secondary and higher education cess. From the above it can be observed that the provisions of MAT are applicable to every company whether public or private and whether Indian or foreign. However, as per section 115JB(5A) MAT shall not apply to any income accruing or arising to a company from life insurance business referred to in section 115B. Further, as per provisions of Section 115V-O the provisions of MAT will not apply to a shipping income liable to tonnage taxation, i.e., tonnage taxation scheme as provided in section 115V to 115VZC.

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Open uri20170510 32134 59004f?1494421790 Anshul Dhawan answered over 2 years ago

As per the concept of MAT, the tax liability of a company will be higher of the following: • Tax liability of the company computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the company by applying the tax rate applicable to the company. Tax computed in above manner can be termed as normal tax liability. • Tax computed @ 18.5% (plus surcharge and cess as applicable) on book profit (manner of computation of book profit is discussed in later part). The tax computed by applying 18.5% (plus surcharge and cess as applicable) on book profit is called MAT.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 komal answered over 2 years ago

Direct tax in lay terms is a tax on income that you have to pay, it cannot be shifted to others. Some of its forms include income tax, wealth tax, etc. Direct taxes are directly levied on individuals, corporations and organisations and collected by way of income tax returns to be filed each year. An indirect tax is collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). Indirect taxes include sales tax, service tax, value-added tax, commodity transaction tax and securities transaction tax among others. One such indirect tax is the minimum alternate tax (MAT). Going forward, we will explain what MAT is, the reasons for its introduction, and who is liable to pay the tax. Normally, a company 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. In the past, a large number of companies showed book profits on their profit and loss account and at the same time distributed huge dividends. However, these companies didn’t pay any tax to the government as they reported either nil or negative income under provisions of the Income-Tax Act. These companies were showing book profits and declaring dividends to their shareholders but were not paying any tax. These companies are popularly known as ‘zero tax’ companies. The Indian Income-Tax Act allows a large number of exemptions from total income. Besides exemptions, there are several deductions permitted from the gross total income. Further, depreciation allowable under the Income-Tax Act, is not the same as required under the Companies Act. The latter provides a lower rate viz-a-viz the I-T Act which computes a higher rate of depreciation. The result of such exemptions, deductions, and other incentives under the Income-Tax Act in the form of liberal rates of depreciation is the emergence of zero tax companies, which in spite of having high book profit are able to reduce their taxable income to nil. In order to bring such companies under the I-T net, Section 115JA was introduced from assessment year 1997-98. Now, all companies having book profits under the Companies Act shall have to pay a minimum alternate tax at 18.5%. MAT is a way of making companies pay minimum amount of tax. It is applicable to all companies except those engaged in infrastructure and power sectors. Income arising from free trade zones, charitable activities, investments by venture capital companies are also excluded from the purview of MAT. However, foreign companies with income sources in India are liable under MAT. For example, book profit before depreciation of a company is Rs. 7 lakh. After claiming depreciation and other exemptions, gross taxable income comes to Rs. 4 lakh. The income tax applicable Rs. 1.2 lakh at a rate of 30%. However, MAT would be Rs. 1.29 lakh (Rs. 7 lakh at 18.5%). The MAT paid can be carried forward and set-off (adjustment) against regular tax payable during the subsequent five-year period subject to certain conditions.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 sonu soni answered over 2 years ago

MAT stands for Minimum Alternate Tax and AMT stands for Alternate Minimum Tax. Initially the concept of MAT was introduced for companies and progressively it has been made applicable to all other taxpayers in the form of AMT. In this part you can gain knowledge about various provisions relating to MAT and AMT. First of all we will understand the provisions of MAT and thereafter the provisions of AMT. As per the concept of MAT, the tax liability of a company will be higher of the following: • Tax liability of the company computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the company by applying the tax rate applicable to the company. Tax computed in above manner can be termed as normal tax liability. • Tax computed @ 18.5% (plus surcharge and cess as applicable) on book profit (manner of computation of book profit is discussed in later part). The tax computed by applying 18.5% (plus surcharge and cess as applicable) on book profit is called MAT.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

As per section 115JB, every taxpayer being a company is liable to pay MAT, if the Income- tax(including surcharge and cess) payable on the total income, computed as per the provisions of the Income-tax Act in respect of any year is less than 18.50% of its book-profit + surcharge (SC) + education cess (EC) + secondary education cess. Companies find various loop-holes to avoid paying income tax by using several exemptions. MAT is a way of making companies pay a minimum amount of tax Albert Einstein once said that the hardest thing in the world to understand is income tax. The statement rings true as tax laws are quite complicated and requires a great deal of time and effort to understand them. Most of us get by with a basic understanding of tax matters. Buy help is not at hand. Direct tax in lay terms is a tax on income that you have to pay, it cannot be shifted to others. Some of its forms include income tax, wealth tax, etc. Direct taxes are directly levied on individuals, corporations and organisations and collected by way of income tax returns to be filed each year. An indirect tax is collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). Indirect taxes include sales tax, service tax, value-added tax, commodity transaction tax and securities transaction tax among others. One such indirect tax is the minimum alternate tax (MAT). Going forward, we will explain what MAT is, the reasons for its introduction, and who is liable to pay the tax. Normally, a company 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. In the past, a large number of companies showed book profits on their profit and loss account and at the same time distributed huge dividends. However, these companies didn’t pay any tax to the government as they reported either nil or negative income under provisions of the Income-Tax Act. These companies were showing book profits and declaring dividends to their shareholders but were not paying any tax. These companies are popularly known as ‘zero tax’ companies. The Indian Income-Tax Act allows a large number of exemptions from total income. Besides exemptions, there are several deductions permitted from the gross total income. Further, depreciation allowable under the Income-Tax Act, is not the same as required under the Companies Act. The latter provides a lower rate viz-a-viz the I-T Act which computes a higher rate of depreciation. The result of such exemptions, deductions, and other incentives under the Income-Tax Act in the form of liberal rates of depreciation is the emergence of zero tax companies, which in spite of having high book profit are able to reduce their taxable income to nil. In order to bring such companies under the I-T net, Section 115JA was introduced from assessment year 1997-98. Now, all companies having book profits under the Companies Act shall have to pay a minimum alternate tax at 18.5%. MAT is a way of making companies pay minimum amount of tax. It is applicable to all companies except those engaged in infrastructure and power sectors. Income arising from free trade zones, charitable activities, investments by venture capital companies are also excluded from the purview of MAT. However, foreign companies with income sources in India are liable under MAT. For example, book profit before depreciation of a company is Rs. 7 lakh. After claiming depreciation and other exemptions, gross taxable income comes to Rs. 4 lakh. The income tax applicable Rs. 1.2 lakh at a rate of 30%. However, MAT would be Rs. 1.29 lakh (Rs. 7 lakh at 18.5%). The MAT paid can be carried forward and set-off (adjustment) against regular tax payable during the subsequent five-year period subject to certain conditions.

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