MINIMUM ALTERNATE TAX (MAT)
In India, in the case of companies, if the tax payable on their taxable income for any assessment year is less than 18.54% of their ‘book profit’(if book profit does not exceed Rs 10 m),or 19.9305% of book profit (if book profit exceeds Rs 10 m), an amount equal to 18.54% of the book profit (if book profit does not exceed Rs 10 m) or 19.9305% of book profit (if book profit exceeds Rs 10 m) is regarded as their tax liability.
The tax so paid could be carried forward and set off against normal tax (in excess of MAT for that year) of future years up to ten years but from the financial year 2010-11 said carry forward shall not apply to a limited liability partnership which has been converted from a private company or unlisted public company.
‘Book profit’ means net profit as per the profit and loss account as adjusted (increased or reduced) by certain specified items which includes income tax paid or payable and the provisions made for unascertained liabilities, amounts carried to any reserves, provisions for meeting unascertained liabilities, losses brought forward or unabsorbed depreciation, deferred tax, interest on tax , surcharge, education cess, income exempt from tax, non-taxable profits from export of goods, computer software etc.
However, the following are included within book profits, despite being exempted from normal income tax:
• profits of undertakings located in free trade zones, software and hardware technology parks
• profits from the export of computer software
• long-term capital gains arising from the transfer of listed equity shares/units.
MAT is applicable in respect of Export Oriented Unit Schemes (EOU) but not Special Economic Zones (SEZ).