MINIMUM
ALTERNATE
TAX
1
HISTORY OF MAT
Reliance Industries Limited (RIL) was one of the
main factor which led to the introduction of MAT.
Introduced in the Finance Act, 1996 by the finance
minister Mr. P. Chidambaram.
MAT was introduced for the Zero Tax companies &
companies paying marginal Tax.
2
MINIMUM
ALTERNATE TAX
It is a form of Income Tax.
It’s levied on companies only i.e. Pvt. Ltd. & Ltd.
Charging Section of MAT is Section 115JB (1) of
Income tax act, 1961.
3
UNDERSTANDING OF
MAT
4
PROFIT SHOWN TO
SHAREHOLDERS :
100%
90%
80%
70%
Profit
60%
Expenses
50%
40%
30%
20%
10%
5
0%
Turnover
PROFIT AS PER INCOME TAX
LAWS :
100%
90%
Establishment in
80% specified Areas
70% Scentific Im-
60% provements
Agricultural
50%
Improvement
40% Profit
30% Expenses
20%
10%
6
0%
Turnover
PROFIT COMPARISON
CHART :
100%
90%
80%
Establishment in
70% specified Areas
Scentific Im-
60%
provements
50% Agricultural
40% Improvement
Profit
30%
Expenses
20%
10%
7
0%
Turnover Turnover
EXAMPLE
ABC Ltd has shown following profits during the A.Y. 2016-
17:
Profit as per P&L A/C Rs. 1,500 Cr.
PGBP as per Income Tax Rs. 100 Cr.
Rate of Income Tax 30%
Rate of MAT 18.5%
Now Income Tax as per PGBP computation will be :
Rs. 100 Cr. * 30% = Rs. 30 Cr.
However Government was expecting tax on Rs. 1,500 Cr of
Profit 8
EXAMPLE
Therefore, after implication of MAT, Company will
have to pay :
Income Tax on PGBP i.e. Rs. 30 Cr.
Higher
OR
MAT on Profit as per P&L A/C i.e.
Rs. 1,500 Cr. * 18.5% = Rs. 277.5 Cr.
Thus company will have to Pay Rs. 277.5 Cr.
9
SEC 115JB (1)
Notwithstanding anything contained in any other provisions of
the Income Tax act
Wherein the case of a company
The income tax payable on the total income as computed
under the Income Tax Act.
Is less than 18.5% of it’s book profits
Such book profits shall be deemed to be the total income of
the assesse.
And tax payable on such total income shall be the amount of10
income tax at the rate of 18.5%.