What Is Mat Tax India

Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987 vide section 115j of the income tax act 1961 it act to facilitate the taxation of zero tax companies i e those companies which show zero or negligible income to avoid tax under mat such companies are made liable to pay to the government by deeming a certain percentage of their book.

What is mat tax india.

Minimum alternative tax is payable under the income tax act. Later it was withdrawn by the finance act 1990 but reintroduced. Mat is a tax levied under section 115jb of the income tax act 1961. In india mat is levied under section 115jb of the income tax act 1961.

In india when applied to companies amt is termed the minimum alternate tax mat operating with a mat credit carry forward mechanism. Minimum alternate tax mat meanwhile is like tax paid in advance. With mat companies have to pay up a minimum amount of tax to the government. The concept of mat was introduced to target those companies that make huge profits and pay the dividend to their shareholders but pay no minimal tax under the normal provisions of the income tax act by taking advantage of the various deductions and exemptions allowed under the act.

This form of tax is applicable to all companies including foreign companies that have established their presence in india. The key reason for introduction of mat is to ensure minimum levels of taxation for all domestic and foreign companies in india. It was first introduced by the finance act 1987 and made effective from ay 1988 89. It was introduced in the year 1987 and.

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 utilised in a. Introduced by the finance act 1987 mat came into effect from assessment year 1988 89. However foreign companies with income sources in india are liable to pay mat. Mat or minimum alternate tax is a provision in direct tax laws to limit tax exemptions availed by companies so that they pay at least a minimum amount of corporate tax to the government.

Let us understand in detail what mat is. Mat is a tax provision reintroduced in 1997 in an attempt to bring zero tax high profits companies into the income tax net. The absence of any changes in the provisions of section 115jaa income tax act which deal with the carry forward and set off of mat credit supports the argument that the brought forward mat credit should be available even for a company which opts for the lower tax regime said gautam mehra leader tax and regulatory services at pwc india.