What is Minimum Alternate Tax (MAT)?
Defination:
- 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.
Suggested Links
What is Wholesale Price Index (WPI) ? What is Corporate Debt Restructuring (CDR) ? What is Capital Adequacy Ratio (CAR) ? What is Cash Reserve Ratio (CRR) ? What is Call Money Rate ?Find us on Facebook
