{"id":13784,"date":"2020-07-28T12:34:25","date_gmt":"2020-07-28T07:04:25","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=13784"},"modified":"2021-02-09T14:37:50","modified_gmt":"2021-02-09T09:07:50","slug":"minimum-alternate-tax-things-you-need-to-know","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/","title":{"rendered":"Minimum Alternate Tax: Things you need to know"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Minimum Alternate Tax comes under the Indirect Tax\ncategory. MAT was deployed by the government to control the organization&#8217;s urge\nto make a high profit by averting tax liabilities due to any exclusion. There\nare several types of taxes in our taxation system applicable to individuals and\ncompanies. The Indian government is putting their best effort to make the\ntaxation framework transparent than ever. <\/p>\n\n\n\n<p>The government is also paying attention to individuals or companies who are unwilling to comply with the taxation norms for the sake of additional profit. Currently, our taxation system is categorized into direct and indirect tax. Minimum Alternate Tax, aka MAT, is a class of tax that comes under the category of indirect tax. Let have a look at fundamental of this tax category.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#What_is_the_Minimum_Alternate_Tax\" >What is the Minimum Alternate Tax?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#Features_of_the_Current_MAT_Regime\" >Features of the Current MAT Regime<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#The_concept_regarding_MAT_calculation\" >The concept regarding MAT calculation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#MAT_Report\" >MAT Report<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#Points_to_remember\" >Points to remember<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/minimum-alternate-tax-things-you-need-to-know\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Minimum_Alternate_Tax\"><\/span>What is the Minimum Alternate Tax?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every company, regardless of its geographical location,\nneeds to pay MAT on a predetermined period. This provision is mentioned under\nsection 115JB of the Minimum Alternate Tax Act. <\/p>\n\n\n\n<p>The rule aims to control tax-avoiding activities on account of deductions, exclusions, and credits. MAT primarily comes under the influence of the <strong><em>Income Tax Act of India, 1961<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/The_Income-tax_Act,_1961#:~:text=The%20Income%2Dtax%20Act%2C%201961%20is%20the%20changing%20Statute%20of,the%20Wealth%20Tax%20Act%2C%201957.\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"666\" height=\"421\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-130.png\" alt=\"Minimum Alternate Tax\" class=\"wp-image-13785\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-130.png 666w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-130-300x190.png 300w\" sizes=\"(max-width: 666px) 100vw, 666px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Eligibility criteria w.r.t Minimum Alternate Tax or MAT<\/h3>\n\n\n\n<p>Minimum Alternate Tax or MAT is a type of tax that bears by companies rather than the individuals or partnership firms. The rules regarding section 115JA are applied to foreign companies that are operating in India. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/relief-granted-to-kfc-franchise-by-itat\/\">Relief Granted to KFC Franchise by ITAT<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Features_of_the_Current_MAT_Regime\"><\/span>Features of the Current MAT Regime<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following list will explain the features of Minimum\nAlternate Tax or MAT.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Advance Payment of Tax<\/h3>\n\n\n\n<p>Every taxpayer is under the obligation of paying their tax in advance without delay as estimated in accordance with. However, this tax is only applicable to those entities those tax liability is Rs 10000 or more for a financial year. Likewise, all firms should mandatorily pay their tax in advance, as per section 115JB of the <a href=\"https:\/\/corpbiz.io\/income-tax-return-filing\"><strong>Income Tax<\/strong><\/a> Act.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">MAT Credit<\/h3>\n\n\n\n<p>Any firm that makes a tax payment as per MAT clause rather\nthan a regular tax, then if the tax paid exceeds the accumulated account, the\nexcess amount will be rerouted to the company as a tax credit. Thus, MAT is\nnothing but a difference between the taxes paid as per\nthe Income Tax Act and MAT provisions. The taxpayers are eligible to move\nforward this credit and set off in the year in which the firm has to address\nremaining tax liabilities w.r.t Income Tax Act.&nbsp;\n<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_concept_regarding_MAT_calculation\"><\/span>The concept regarding MAT calculation <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Suppose company A reaps a profit of RS.10 lac. The firm, in this case, obtains gross taxable income Rs\u20145 lac after relevant deductions, exemptions, and depreciation. <\/p>\n\n\n\n<ul><li>In this case, Income\ntax = 30% of Rs.5 lac = Rs.1,50,000<\/li><li>MAT = 18.5% of Rs.10\nlac = Rs. 1,85,000<\/li><li>So excess tax\npayable will be Rs.1,85,000 \u2013 Rs. 1,50,000 = Rs.35,000<\/li><\/ul>\n\n\n\n<p>Thus, the taxpayer can carry forward the tax credit of Rs\n35,000 and set-off against future tax liabilities. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Steps to calculate MAT<\/h3>\n\n\n\n<ol><li>Estimate total income under the Income Tax Act,1961.<\/li><li>Now estimate the book profit as per section 115JB.<\/li><li>Total income is subjected to tax under the Income Tax Act. You need to compute this tax.<\/li><li>Estimate tax at 15% on book profit.<\/li><li>now the payable tax is equivalent to higher of Step 3 or Step 4<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"MAT_Report\"><\/span>MAT Report<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The companies under the obligation to pay MAT have to\nprovide a MAT report as per Form 29B. <\/p>\n\n\n\n<p>The submission of this report has to be done along the\nROI filed.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">MAT &amp; Special Economic Zones (SEZs)<\/h3>\n\n\n\n<p>Initially, when MAT provisions come into effect, MAT\ndirectives did not apply to the profit earned by the companies in Special\nEconomic Zones or SEZs. However, after some crucial amendments in 2011, it\nbecame mandatory for such firms to follow all the provisions under the MAT\nclause. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Future of MAT in India<\/h3>\n\n\n\n<p>The majority of the firm deems MAT as a relentless form\nof taxation. Due to some stringent norms, the corporate sectors requested the\ngovernment to make this tax form more inclusive and flexible through necessary\namendments. Consequently, the Indian government, in response to this\ncomplexity, founded a special committee that will look into the disputes w.r.t\nMAT payment. <\/p>\n\n\n\n<p>At present, the committee is not working to its full\npotential as it is now only focusing on government direction to address the\nresolution of MAT demands w.r.t foreign institutional investors. Several\nforeign investors, in the past, have received notices regarding the payment of\nMAT. However, that doesn&#8217;t mean the government is not responding to this\ncomplexity. Several attempts have been made by the government to make MAT more\nconducive for the taxpayer across the nation. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Points_to_remember\"><\/span>Points to remember <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>The concept of (MAT)\nwas deployed in the tax system with the aim to control the tax averting\nactivities within the corporate sector.&nbsp;<\/li><li>It primarily tackled\nthe loopholes in the taxation system that occurs due to the non-payment of the\ntaxes from the corporate sector.<\/li><li>It hinders the\ncompany&#8217;s attempt to take advantage of incentives and exemptions with a goal to\nreap more profit.<\/li><li>The MAT payable, as under\nthe ITA, will be deemed as income tax.&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax is like a fuel that triggers the country&#8217;s development. But whenever the taxation norms turn out vague and stringent, the companies suffer in the longer run. Presently, MAT provisions don&#8217;t seem favorable from the corporate viewpoint. However, the government&#8217;s frequent attempt in this direction implies that some changes are around the corner that will make MAT more flexible and inclusive for the taxpayers.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/online-income-tax-slab-and-rate-for-financial-year-2020-21\/\">Income Tax Slab and Rate for financial year 2020-21<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Minimum Alternate Tax comes under the Indirect Tax category. MAT was deployed by the government to control the organization&#8217;s urge to make a high profit by averting tax liabilities due to any exclusion. There are several types of taxes in our taxation system applicable to individuals and companies. The Indian government is putting their best [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":13788,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[152],"tags":[806],"acf":{"service_id":"47"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6298,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/13784"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=13784"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/13784\/revisions"}],"predecessor-version":[{"id":25775,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/13784\/revisions\/25775"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/13788"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=13784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=13784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=13784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}