minimum alternate tax

CHENNAI3rd Floor, ‘Creative Enclave’,

148-150, Luz Church Road,Mylapore,

Chennai - 600 004.Tel: +91 - 44 - 2498 4821

BANGALORE Suite 920, Level 9,

Raheja Towers,26-27, M G Road,

Bangalore - 560 001.Tel: +91 - 80 - 6546 2400

COIMBATOREBB1, Park Avenue,

# 48, Race Course Road,Coimbatore - 641018.

Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

MINIMUM ALTERNATE TAX

Divya RamanCorporate Department



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

INTRODUCTION

• Company liable to pay tax as per Income Tax Act, 1961.

• P/L account prepared according to Companies Act 1956.

• Income Tax Act provides exemptions in computing taxable income.

• Many companies would have book profits as per P/L account.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Intd.. Contd.

• But several exemptions under Income Tax Act.

• Such Companies do not pay any income tax.

• Such Companies are called Zero Tax Companies.

• These Companies even though having book profits escape from paying any tax under the Income Tax Act.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Section 115JA

• Came into effect from the A.Y 1997-98.• If the total income of a Company for the

previous year is less than 30% of its book profits, the total income of Company chargeable to tax for the previous year shall be 30% of the book profits.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Salient Features

• Applicable to only companies except those engaged in infrastructure and power sectors.

• Payment of a minimum tax by deeming 30 per cent of the book profits computed under the Companies Act, 1956 as taxable income, in a case where the total income as computed under the provisions of the Income-tax Act, 1961 is less than 30 per cent of the book profit where the total income, as computed under the normal provisions of the Income-tax Act is more than 30 per cent of the book profit, tax shall be

charged on the same.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Salient Features Contd..

• Income arising from Free Trade Zones (FTZs), 100 per cent Export-Oriented Undertakings (EOUs), charitable activities, investment by a venture capital company and other exempted incomes are excluded from the purview of the alternate tax.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Salient Features Contd..

• Since the alternate tax is applicable only where the normal total income computed is lower than 30 per cent of the book profits, so long as the enterprises (other than FTZ units and EOUs) earning income from export profits do not have their component of export income higher than 70 per cent of the book profits, the provisions of section 115JA will not be attracted. In other words, the MAT will apply only to such cases where export profits forming part of book profits of an assessee exceed 70 per cent of the total profits.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Tax Credit Scheme

• MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions.

1. 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. Regular tax in this case means the tax payable on the basis of normal computation of total income of the company.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Tax Credit Scheme Contd…

• 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.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Section 115JB

• If the tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after April 1 2001, is less than 7.5% of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be 7.5% of such book profit.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Impact of Section 115JB

All companies are liable for payment of advance tax having regard to the provisions contained in new section 115JB. Consequently, the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable where facts of the case warrant.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

MAT on foreign companies

• Foreign companies with income sources in India may be liable to MAT and required to maintain book of accounts. This is irrespective of whether the overseas companies have a permanent establishment within the country.

• Companies need to assess the impact of the minimum alternative tax on their taxable income if they are undertaking projects in India or have branches in India.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Union Budget 2010-11

• Under this Budget the rate of MAT has been increased to 18% under Section 115JB.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Union Budget 2011-12

• It has been proposed that the Minimum Alternate Tax (MAT) chargeable u/s 115JB be increased from 18% of ‘book profits’ of the company currently to 18.5% of ‘book profits’ of the company.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Union Budget 2011-12 Contd..

Further, it is proposed to apply Alternate Minimum Tax on LLP (Limited Liability Partnership) as well and to insert a new chapter XII-BA containing special provisions relating to LLP.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Conclusion

The Minimum Alternate Tax is in one way making the corporate/companies to pay a minimum amount of tax and on the other hand the Companies are trying to find out loop-holes to get rid of the same by putting themselves under the SEZ and such other areas where there are several exemptions.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

THANK YOU for your patient hearing

minimum alternate tax

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