Computation of book profit & MAT credit U/S 115JB

• September 23, 2019
• CA Chandan Agarwal's Office

Minimum Alternative Tax (MAT) and its computation of book profit and MAT credit under section 115JB of Income Tax Act, 1961

1. Introduction

The Minimum Alternative Tax (MAT) is a provision introduced in direct tax laws to limit the tax deductions/exemptions otherwise available to taxpayers so that they pay a ‘minimum’ amount of tax to the government. 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. Later on, it was withdrawn by the Finance Act, 1990 and then reintroduced by Finance (No. 2) Act, 1996, wef 1-4-1997. In India, when applied to companies, AMT is termed the Minimum Alternate Tax (MAT), operating with a “MAT credit” carry forward mechanism. This allows a company to carry forward the “excess” tax it pays because of MAT (as against its regular tax liability) in a particular year, to be utilized in a future year as a credit against its regular tax liability.

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