As per the current tax provision of the income tax act 1961, Minimum Alternate tax (MAT) are levied only on companies and Alternate Minimum Tax (AMT) on limited liability partnerships (LLPs). No such tax is levied on other form of businesses such as partnership firms, sole proprietorship, association of person etc.
But In Budget 2012, finance minister of India Mr. Pranab Mukherjee proposed to alter the existing tax provision in respect to AMT. As per proposed tax provision, section 115C will be substituted with finance bill 2012 and all entities (other than companies) who claim tax deduction u/s 10A or any deduction under section 80H to 80RR, will be liable to pay alternate minimum tax @ 18.5% of adjusted total income.
Even an individuals who claim deduction under section 80H to 80RR is liable to pay AMT @18.5 of adjusted total income. But in case of individuals or HUF or a body of individuals or an artificial judicial person whose adjusted total income (Total Income minus tax deductions) does not exceeds Rs 20 lakhs are not liable to pay AMT.
What Is MAT (Minimum Alternate Tax)?
As per tax law, company pays tax on the income computed according to the provisions of the income tax act whereas the profit and loss account of the company is prepared as per provision of companies act. Due to this large number of companies who were incurring good amount of profit (as per profit & loss account) and declaring dividends to their shareholders were not liable to pay any income tax as their tax payable as per income tax act was either zero or very less. These companies comes into a category of zero tax companies.
To make such companies pay tax on their income who enjoy tax exemptions and incentives under various sections of the income tax act, government imposed Minimum Alternate Tax. As per the MAT provision, zero tax companies are required to pay a fixed percentage of book profit (Profit as per profit & Loss account) i.e 18.5% (FY 2011-12) as Minimum Alternate Tax.
What Is AMT (Alternate Minimum Tax)?
AMT is similar to MAT, any entity or individual whose adjusted total income exceeds Rs 20 lakhs is liable to pay Alternate Minimum tax @18.5%.
What Is The Difference Between Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT)?
Although MAT and AMT are similar but there are few difference which apart both from each other. lets have a look of the difference between MAT vs. AMT.
Minimum Alternate Tax (MAT)
Alternate Minimum Tax (AMT)
|MAT is applicable on companies||AMT is applicable on all the entities other than companies (even individuals) who claim profit linked deductions.|
|MAT is payable on book profit if the tax payable is less than MAT||AMT is payable on adjusted total income of 20 lakhs or more, if tax payable is less than AMT.|
|Rate Of MAT : 18.5% + Surcharge (5%) + Education Cess (3%) = 20%||Rate Of AMT : 18.5% + Education Cess (3%) = 19.05%|
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