Minimum Alternate Tax (MAT)
Introduction
MAT ensures that companies pay a minimum amount of tax if their tax liability under normal provisions of the Income-tax Act is less than 15% of their book profit. This tax is applicable even if a company reports nil income or has tax losses.
Applicability
MAT applies to all companies, including foreign and domestic, except:
- Companies in life insurance or shipping (subject to specific provisions).
- Foreign companies taxable under presumptive schemes (Section 44B,44BB,44BBA, or 44BBB) or without a Permanent Establishment in India.
- Foreign companies resident in non-DTAA countries and not required to register in India under any law relating to companies.
- Companies opting for concessional tax rates underSections 115BAAor 115BAB.
Rate of MAT
- MAT is 15% of book profit, plus applicable surcharge and cess.
- For companies in International Financial Services Centres (IFSC) deriving income solely in convertible foreign exchange, the MAT rate is 9%.
Calculation of MAT Liability
The higher of:
- a) Tax on total income computed under normal provisions.
- b) 15% of book profit (or 9% for eligible IFSC units)
The tax computed as per normal provision or as per MAT shall be further increased by the applicable surcharge and health & education cess before comparing the higher of the two.
Computation of Book Profit
Net profit computed as per the financial statement shall be adjusted with certain positive and negative adjustments. The resultant figure, as obtained after these adjustments, shall be deemed the book profit.
The financial statement shall be prepared as per Schedule III of the Companies Act, 2013, or as per the provisions of the Act governing such company.
Power of the Assessing Officer
The Assessing Officer can recalculate net profit if financial statements deviate from the Companies Act or accounting policies and standards.
Certification Requirement
Companies liable for MAT must file a Chartered Accountant’s certificate (Form 29B) electronically at least one month before the due date for filing the return under Section 139(1) or along with the return in response to a notice under Section 142(1)(i).