What Is Mat Tax Rate

Income tax rates are decided and governed by income tax act 1961 and are subject to change every year.

What is mat tax rate.

Mat a brief introduction. Mat is levied on book profit unlike normal corporation tax which is levied on taxable profit. The rate of amt is also at 18 5. Tax computed as per the normal provisions of the income tax law i e by applying the relevant tax rate to the taxable income of the company.

Minimum alternate tax mat. Mat is a tax provision reintroduced in 1997 in an attempt to bring zero tax high profits companies into the income tax net. In september 2019 the government reduced the mat tax rate from 18 5 per cent to 15 per cent while also slashing the corporation tax rate to 22 per cent from 30 per cent. This article will cover the income tax rates applicable to domestic companies for the assessment year 2019 2020 and assessment year 2020 2021 as per the taxation laws amendment act 2019 respectively also cover minimum alternate tax mat provisions alongwith calculation of book profit.

In india mat is levied under section 115jb of the income tax act 1961. 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. Tax computed as per the mat provision on book profit 18 5 tax rate plus surcharge and education cess as applicable applicability of mat minimum alternate tax or mat is only applicable to companies and not to individuals hufs partnership firms etc. Tax computed at 15 previously 18 5 on book profit plus cess and surcharge.

It is calculated on the basis of the book profits of a company not its. The corresponding tax similar to mat but imposed on individuals or non corporate entities who claim certain deductions under the it act deduction under section 80h to 80rrb except 80p deduction under section 35ad and deduction under section 10aa is known as alternate minimum tax amt. It was introduced in the year 1987 and. The promulgated ordinance reduced the mat rate of tax for ay 2020 21 to 15 per cent but did not amend section 115jaa related to mat credit.

Rules pertaining to section 115ja are applicable to foreign companies that generate profits. Also mat credit and carry forward provisions were dropped though taxpayers were allowed to utilise the mat credit they had carried forward from earlier years. Hence cbdt issued a circular no 29 2019 dated 02 10 2019 to clarify that a domestic company which availed the benefit of the reduced tax rate by using the option under section 115baa shall not be entitled to avail the brought forward mat credit.