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The Government has introduced various profit linked deductions and incentives
in order to encourage investment in various industries. Taxpayers who are
eligible to claim such deductions/incentives would become zero tax companies or
may end up paying marginal tax though they are capable of paying normal tax.
The Government also needs regular / consistent inflow of tax which is one of its
major revenues to fund various expenses for the welfare of the country. Hence,
ensuring not to completely disrupt the intention of introducing such
incentives/deductions by taking it away indirectly and also to ensure levy of tax
on such zero tax/marginal tax companies, concept of Minimum Tax was
introduced. This was initially introduced for companies in the name of
‘Minimum Alternate Tax (MAT)’ to collect minimum tax to be paid by companies
who are claiming profit linked deductions in such financial years (FYs) wherein
normal tax payable is lower than MAT. Adjusted total income will be computed
for MAT by adding and deducting certain specified items. Then, taxed at a rate
lower than normal rate of tax is levied on the adjusted income. However, credit
for MAT paid in earlier years was allowed to be carried forward and set off in
subsequent year wherein normal tax payable was higher than MAT.
Applicability of AMT
As already mentioned, initially the concept of minimum tax was introduced for
companies and progressively made applicable to non-corporate taxpayers.
Finance Act, 2011 introduced AMT on Limited Liability Partnership (LLP) and
Finance Act 2012 amended the provisions as it stands today. Accordingly, AMT
provisions are applicable to following taxpayers:
Chapter VI-A under the heading “C. — Deductions in respect of certain incomes’
– These deductions are under Section 80H to 80RRB provided in respect of
profits and gains of specific industries such as hotel business, small scale
industrial undertaking, housing projects, export business, infrastructure
development etc. However, deduction under Section 80P which provides
deduction to co-operative societies is excluded for this purpose; or
Based on the above, it can be concluded that AMT provisions are applicable only
to those non-corporate taxpayers having income under the head ‘Profits or Gains
of Business or Profession’.
Further, as mentioned above AMT provisions are applicable only when normal
tax payable is lower than AMT in any FY.
Amount (in
Particulars
Rs)
Taxable income (A) XXXXX
Add: Deduction claimed if any under Chapter VI-A from 80H to
XXXXX
80RRB except 80P (B)
Deduction claimed if any under Section 10AA (C) XXXXX
Deduction claimed if any under Section 35AD reduced by regular
XXXXX
depreciation allowed (D)
Adjusted total income (E) = (A)+(B)+(C)+(D) XXXXX
AMT – 18.5% of (E) XXXXX
Though AMT was introduced to collect tax from zero tax companies, it was also
with the intention of having consistent flow of tax to public fund. Therefore,
while minimum tax is being levied in an FY wherein normal tax is lower than
AMT, in subsequent FYs wherein AMT is lower than normal tax, AMT paid
earlier is allowed to be carried forward and reduced against normal tax to the
extent of the difference between normal tax and AMT. Balance if any after such
set off can be carried forward to subsequent FYs. This concept is called AMT
Credit. However, AMT Credit is not allowed to be carried forward for infinity but
only upto 10 FYs succeeding the FY in which such AMT is paid.
In case of any change in normal tax due to any order passed by income tax
department, AMT credit will also change accordingly.
Further, if taxpayer has any foreign tax credit (tax paid in foreign countries with
which India has bilateral or unilateral tax agreement) to be claimed against AMT,
any FTC in excess of AMT shall be ignored.
Reporting Requirement
All taxpayers to whom AMT provisions are applicable is required to obtain a
report from Chartered Accountant certifying that adjusted total income and
AMT have been computed as per provisions of Income-tax Act, in Form No. 29C
and furnish the report on or before the due date for filing the return of income.
Report can be filed electronically along with return of income.
Particulars FY 1 FY 2
Taxable income (A) 19,30,000 20,50,000
Add: Deduction claimed if any under Chapter VI-A
1,00,000 Nil
from 80H to 80RRB except 80P (B)
Deduction claimed if any under Section 10AA (C) 75,000 25,000
Deduction claimed if any under Section 35AD reduced
4,50,000 Nil
by regular depreciation allowed (D)
Adjusted total income (E) = (A)+(B)+(C)+(D) 25,55,000 20,75,000
Comparison of normal tax and AMT
AMT – (18.5% of (E) plus education cess @ 3%) (F) 4,86,855 3,95,391
Tax liability computed as per normal provisions of the
Income-tax Act – normal tax liability as per applicable 4,03,245 4,40,325
slab for individual including education cess (G)
4,86,855
https://cleartax.in/s/amt-alternative-minimum-tax