What is Minimum Alternate Tax (MAT)?


  •  Minimum Alternate Tax (MAT) is a way of making companies pay minimum amount of tax.
  • It is applicable to all companies except those engaged in infrastructure and power sectors.
  • Income arising from free trade zones, charitable activities, investments by venture capital companies are also excluded from the purview of MAT.
  • However, foreign companies with income sources in India are liable under MAT.
  • For example, book profit before depreciation of a company is Rs. 7 lakh. After claiming depreciation and other exemptions, gross taxable income comes to Rs. 4 lakh. The income tax applicable Rs. 1.2 lakh at a rate of 30%. However, MAT would be Rs. 1.29 lakh (Rs. 7 lakh at 18.5%).
  • The MAT paid can be carried forward and set-off (adjustment) against regular tax payable during the subsequent five-year period subject to certain conditions.