Amendments in Minimum Alternative Tax (MAT)

Section 115JB, which provides for minimum alteration tax, has been prescribed at a rate of 18.5% and this will be affective from 1st April 2012

The computation mechanism has also undergone change w.r.t book profits

  1. Reduction allowed w.r.t profits eligible for deduction u/s 80HHC
  2. Reduction allowed w.r.t profits eligible for deduction u/s 80HHE
  3. Reduction allowed w.r.t profits eligible for deduction u/s 80HHF

All the above reductions have been withdrawn with retrospective effect from 1sr April 2005.

There was, hitherto, exemption from MAT from income accrued/arising on/after  1ST April 2005 from any business carried on, or services rendered, by an entrepreneur/ developer  in  a unit /SEZ as the case may be. This exemption will be withdrawn w.r.t P.Y.2011-2012.

minimum alteration tax was introduced  due to difference in the profits computed by the companies.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. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. In order to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98.

According to this section, if the taxable income of a company computed under this Act, in respect of previous year 1996-97 and onwards is less than 30 % of its book profits, the total income of such company is chargeable to tax for the relevant previous year shall be deemed to an amount equal to 30 % of such book profits.


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