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What is MAT and How does it affect your Private Limited Company

MAT stands for Minimum Alternate Tax and it is applicable on Indian companies.

The important points relating to it are:

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MAT is applicable on both Indian and foreign companies.
MAT is applicable on both private and public limited companies.
MAT is levied on a company when the tax liability (including surcharge and cess) of the company under normal provisions is lower than 18.5% of "BOOK PROFIT" of the company

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When the tax liability of a company (Indian/ foreign, private/public limited) under normal provisions is lower than 18.5% of the book profit of the company, the Book Profit is deemed as Total Income of the company; and 18.5% of the Book Profit is deemed as tax liability.

WHAT IS BOOK PROFIT?

Book Profit is nothing but Net Profit as per Profit andamp; Loss A/C prepared according to Sixth Schedule of Companies Act, after some additions and deletions.

[su_heading size="15" margin="40"]STEPS TO CALCULATE MAT U/S 115JB[/su_heading]

[su_spoiler title="STEP 1. CALCULATION OF BOOK PROFIT" style="fancy" icon="arrow-circle-1"]

Net Profit as per Profit andamp; Loss Account

add. Amounts added back if debited to P/L A/C

Income tax paid/ payable
Amount carried to any reserves
Any Provisions
Provision for losses of subsidiary companies
Dividend paid/proposed
Expenses relating to exempt income
Depreciation
Deferred tax if debited to P/L A/C
Provision for diminution in value of asset
Amt standing in revaluation reserve w.r.t. revalued asset on retirement/ disposal of such asset

less. Amounts to be deducted if credited to P/L A/C

Amt withdrawn from reserves/ provisions
Income exempt from tax u/s 10,11,12
Depreciation other than because of revaluation of assets
Amt. withdrawn from Revaluation reserve credited to P/L A/C to the extent it does not exceed the amt of depreciation on account of revaluation of assets
Brought forward Losses or unabsorbed depreciation, whichever is less, as per books (Where a company has only one of the 2 - i.e. b/f losses or unabsorbed depreciation - nothing is deductible as one of the two figures is nil).
Profit of sick industrial unit
Deferred tax if credited to P/L A/C

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[su_spoiler title="STEP 2. CALCULATION OF TAX LIABILITY U/S 115JB" style="fancy" icon="arrow-circle-1"]

For A.Y. 2013-14, tax rate u/s 115JB is::

MAT

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[su_spoiler title="STEP 3. COMPARISON andamp; ANALYSIS OF TAX U/S 115JB andamp; TAX UNDER NORMAL PROVISIONS" style="fancy" icon="arrow-circle-1"]

If tax under normal provisions is lower than tax u/s 115JB, then

Book Profit is Taxable Income andamp;
Tax Rate as per above chart is levied on Book Profit.

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Consequences of Applicability of MAT:

If MAT is applicable, an additional report i.e. Form 29B from a CA is required to be filed along with the return of income.

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