What is Minimum Alternative Tax?

Answer 1

its a tax that has to be paid by the companies that are enjoying tax benefits or tax exemption under various schemes.
its mostly targetted to the R&D companies and Export oriented units which enjoy tax emptions.

under this they have to pay a particular amount of MAT, so they come under the tax net.

Answer 2

Minimum Alternative Tax India

Answer 3

This is a simple system by which small traders and business persons can make a self assessment , and decide whether they are liable to pay tax and pay just a fixed sum which is small enough to encourage tax compliance. It has been a great success in India and a lot of such assessees can be seen proudly displaying their paid Chalan at the shop premises. Which goes to prove that the simpler the tax administration better will be the compliance!

Answer 4

lox-the-fox: you are slightly out of date. 115JA was replaced by section 115JB for assessment years 2001-02 onwards. As per this section, your normal tax payable is to be compared with 7.5% of your book profits and you are required to pay the higher of the two. From assessment year 2007-2008 onwards your normal tax payable will be compared with 10% of book profits are your required to pay the higher of the two. Credit for MAT paid can be carried forward under section 115JAA for 5 years.

http://www.taxmann.com/TaxmannDit/Displaypage/dpage1.aspx?md=2&typ=cn&yr=2006&chp=3320

Answer 5

Normally, a comapny 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. Inorder 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.

A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under:-
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. Tegular tax in this case means the tax payable on the basis of normal computation of total income of the company.
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.