Define Mat In Income Tax

All companies are required to pay corporate tax based on which is higher of the following.

Define mat in income tax.

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. It is allowed to be carried forward for a period of 15 financial years. Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987 vide section 115j of the income tax act 1961 it act to facilitate the taxation of zero tax companies i e those companies which show zero or negligible income to avoid tax under mat such companies are made liable to pay to the government by deeming a certain percentage of their book. Mat is a way of making companies pay a minimum amount of 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. The concept of mat credit was re introduced in 2005 with a carry forward mechanism of five years. 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. Minimum alternative tax is payable under the income tax act.

In india mat is levied under section 115jb of the income tax act 1961. 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. No such tax is levied on other form of businesses such as partnership firms sole proprietorship association of person etc. Companies find various loop holes to avoid paying income tax by using several exemptions.

But here only mat on company s u s 115jb is discussed. Mat is calculated at 15 of the book profit as per section 115jb of income tax act 1961. Jun 07 2018 10 06 ist. 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.

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. Mat is similar to an advance tax. It was introduced in the year 1987 and. With mat companies have to pay up a minimum amount of tax to the government.