AKSHAY KSHIRSAGAR
Applicability of Alternative Minimum Tax in India
The alternative minimum tax (AMT) is applicable to all non- corporate taxpayers. AMT is a minimum tax that is leviable alternative to normal tax. Current tax rate of AMT is 18.5% plus cess.
To encourage the startups and to boost investment in various industries government has introduced several deduction for corporate and non-corporate tax payers. But deductions like 80IAC for startup LLP’s and companies end up paying no tax.
Due to increase in the number of zero tax paying company, MAT was introduced. The provisions of MAT are applicable to a corporate taxpayer only. The provisions relating to Alternative Minimum Tax are applicable to non-corporate taxpayers in a modified pattern in the form of Alternate Minimum Tax, i.e., AMT. Thus, it can be said that MAT applies to companies and AMT applies to a person other than a company.
The provisions relating to AMT are given in sections 115JC to 115JF. Alternative Minimum Tax is minimum tax levied alternative to the normal tax. AMT is leviable to non-corporate tax payer @ 18.5% plus cess.
As the name suggest, AMT is minimum tax payable on the total income @18.5% if normal tax is less the AMT. For example if taxpayer net liability is Rs. 500 and AMT is Rs. 11,000, then tax liability is 11,000. So, irrespective of normal tax, AMT has to be paid by taxpayers to whom AMT provisions apply.
ALTERNATIVE MINIMUM TAX Applicability
Alternate minimum tax is applicable to LLP’s, Partnership firms and all non-corporate taxpayers. AMT is applicable to all non-corporate tax payer who has claimed deduction under section 80H to 80 RRB (except 80P), deduction under 35AD and deduction under 10AA. Hence AMT is not applicable to those non-corporate tax payer who have not claimed any deduction under above discussed sections.
Section 80H to 80RRB are deductions claimed by specific business such as hotel business, small scale industrial undertaking, housing projects, export business, infrastructure development etc.
Section 80P deduction can be claimed by co-operative housing society for interest earned from co-operative banks.
Section 35AD is deduction allowed for only specified business which are nature of warehouse, cold storage, fertilizer or hospital with more than 100 beds etc.
Section 10AA is deduction claimed from profits by Special Economic Zone.
Non Applicability Alternative Minimum Tax
AMT is not applicable to corporate assessee AND to assessee Individual, HUF, AOP, BOI whose adjusted total income does not exceed 20 Lakhs for current financial year.
For Example
Particulars Amount
Total Income of the assessee under normal provisions of the Act 20,00,000
Deduction under section 10AA 50,000
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Total Adjusted Income 20,50,000
What is ALERNATIVE MINIMUM TAX rate ?
For individuals to whom AMT is applicable, AMT is levied at a rate of 18.05%. This rate will be charged on the adjusted total income. Additionally, surcharge and cess could also be levied as applicable.
Also what is ALTERNATIVE MINIMUM TAX Credit ?
AMT was introduced by government to maintain consistent tax flow. If a assessee tax liability is higher under AMT calculations and the individual pays the taxes due, they will be authorised to claim a certain amount of credit in the following 15 years based on how much AMT has been paid.
While minimum tax is being levied in an FY wherein normal tax is lower than AMT, in subsequent FYs wherein AMT is lower than normal tax. This concept is called Alternative Minimum Credit.
Required Compliance
All taxpayers to whom AMT provisions are applicable need to obtain certification from Chartered accountant for total adjustable income. Report can be filed along with return of income.