What Is Mat Tax Credit

One can find provisions relating to carry forward and adjustment of mat credit in section 115jaa.

What is mat tax credit.

When mat for a company is greater than its normal tax liability the difference between the mat and normal tax liability is called mat credit. 8 lakh while the liability as per the provisions of mat is rs. With mat companies have to pay up a minimum amount of tax to the government. In india mat is levied under section 115jb of the income tax act 1961.

This mat credit can be carried forward and set off for 10 consecutive assessment years succeeding the year in which the tax credit first accrued. Tax liability of a company for fy 2019 20 under normal provisions of the income tax act is rs. When any amount of tax is paid as mat by the company then it can claim the credit of such tax paid in accordance with the provision of section 115jaa. Such excess of tax credit is allowed to be carried forward and set off in the financial year in which the company is liable to pay tax under the general provisions of the income tax act.

If during a year a company has paid tax liability as per mat it is entitled to claim credit of excess of mat paid over the normal tax liability in the following year s. What is mat credit. Tax it pays because of mat as against its regular tax liability in a particular year to be utilised in a future year as a credit against its regular tax liability. However the increase in mat rates over the years has made it extremely difficult for companies to avail their mat credit even though the carry forward period.