What is Minimum Alternate Tax?

Last Updated at: Oct 30, 2020
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As per the Finance Act 2020, a domestic company that has opted for a special taxation regime under Section 115BAA & 115BAB of the Income Tax Act is exempted from the provision of Minimum Alternate Tax (MAT). However, no exemption is available in cases where Section 115BA has been opted for.


A company is liable to pay tax on the income computed according to 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.

Provision of Minimum Alternate Tax (MAT) has been introduced for companies popularly known as the ‘Zero Tax Companies’. These are the companies showing book profits and declaring dividends to the shareholders, but are not paying any income tax. Book profit means net profit as shown in the profit and loss account. The company shall furnish a report in Form 29B after certifying it by Chartered Accountant that book profits have been computed in accordance with the said section.

Under MAT, wherever the income tax payable on the total income of a company, in respect of any previous year, is less than the ‘prescribed percentage of its book profits’, such book profit shall be deemed to be the total income of the company and the tax payable on such total income shall be at the ‘prescribed percentage of book profits’, plus surcharge and education cess.

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Tax Credit for MAT: As per Section 115JAA ,a tax credit is allowed, where a company pays MAT, against tax payable at normal rates in any of the prescribed subsequent assessment years. It shall be allowed on the difference between the tax on the total income and the MAT which would have been payable for that assessment year.

Provision of MAT is not applicable to:
Income from the business of developing, maintaining, and operating certain infrastructure facilities
Income from units in specified zones or specified backward districts
Income of certain loss-making companies
Export profits