Define Mat In Income Tax

The concept of mat was introduced to target those companies that make huge profits and pay the dividend to their shareholders but pay no minimal tax under the normal provisions of the income tax act by taking advantage of the various deductions and exemptions allowed under the act.

Define mat in income tax.

With mat companies have to pay up a minimum amount of tax to the government. Mat a brief introduction. The concept of mat credit was re introduced in 2005 with a carry forward mechanism of five years. But here only mat on company s u s 115jb is discussed.

Companies find various loop holes to avoid paying income tax by using several exemptions. Jun 07 2018 10 06 ist. It was introduced in the year 1987 and. 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.

Due to increase in the number of zero tax paying companies mat was introduced by the finance act 1987 with effect from assessment year 1988 89. Under the provisions of section 115jb where the income tax calculated under the income tax act is less than 18 5 of the book profit then such book profit shall be deemed to the total income of the assessee and tax payable by the assessee shall be 18 5 on book profits. Minimum alternative tax is payable under the income tax act. Mat is a way of making companies pay a minimum amount of tax.

In india mat is levied under section 115jb of the income tax act 1961. It is allowed to be carried forward for a period of 15 financial years. Mat credit is the difference between the tax the company pays under mat and the regular tax. All companies are required to pay corporate tax based on which is higher of the following.

Tax computed as per the normal provisions of the income tax law i e by applying the relevant tax rate to the taxable income of the company. Year but by taking the advantage of various provisions of income tax law like exemptions deductions depreciation etc it may have reduced its tax liability or may not have paid any tax at all. Mat is similar to an advance tax. As per section 115jb every taxpayer being a company is liable to pay mat if the income tax including surcharge and cess payable on the total income computed as per the provisions of the income tax act in respect of any year is less than 18 50 of its book profit surcharge sc education cess ec secondary and higher education cess.