Alternate Minimum Tax (AMT) - Section 115JC of Income Tax

Updated: Jun 18, 2020

Under the Income Tax Act, there is a concept of Minimum Alternate Tax for the corporate assessee according to which corporate assessee would require to pay minimum alternate tax subject to certain conditions. The concept of Alternate minimum tax was introduced to collect minimum tax from the assessee who claims certain profit-related deductions and is liable to pay negligible tax under the normal provision.


What is ALTERNATE MINIMUM TAX?

Considering the gist of Section 115JC, AMT is computed on Adjusted Total Income of a Non-Corporate Assessee (Non-Corporate Assessee includes INDIVIDUAL/HUF/AOP/BOI (whether Incorporated or not), Artificial Judicial Person).


Applicability of ALTERNATE MINIMUM TAX

AMT is applicable to Non-Corporate Assessee and such assessee should have claimed deduction under:


  • Chapter VI heading C i.e 80H to 80RRB (except 80P) OR

  • Under Section 10AA (Profit derived by SEZ units) OR

  • Section 35AD (Deduction for expense on specified business)


Tax Under AMT is payable when:

"TAX PAYABLE AT NORMAL RATE < TAX PAYABLE AT AMT RATE"


Non-Applicability of ALTERNATE MINIMUM TAX

AMT is not Applicable to:

  1. Corporate Assessee

  2. Non-Corporate Assessee whose ADJUSTED TOTAL INCOME does not exceed Rs.20 lakhs

What is ADJUSTED TOTAL INCOME?

Calculation of Adjusted Total Income:


Calculation of Adjusted Total Income for Alternate Minimum Tax as per Section 115JC

What is the rate of ALTERNATE MINIMUM TAX (AMT)?
  • AMT on Adjusted Total Income is 18.5%

  • In addition to Tax Surcharge is Applicable to the assessee

If Firm/Co-op Soc:

Adjusted Total Income less than 1 crores - "NIL"

Adjusted Total Income more than 1 crores - 12% of AMT

If Individual/HUF etc:

Adjusted Total Income less thane 50 lakhs - "NIL"

Adjusted Total Income between 50 lakhs and 1 Crore - 10% of AMT

Adjusted Total Income above 1 Crore - 15% of AMT


In addition to Surcharge:

Cess @ 4% of AMT and Surcharge is payable by the assessee.


Rate of Alternate Minimum Tax and Surcharge and Cess

Example: Tax Calculation under AMT
Calculate tax under AMT (Alternate Minimum Tax)

Since Tax under AMT is more than Normal Tax, Assessee would require to pay tax at AMT.


Tax Credit and Carry Forward under AMT
  • If in any year assessee has paid tax under AMT difference between AMT and Regular Tax can be carried forward for a period of up to 10years.

  • Such Tax Credit can be used in the subsequent year where assessee is required to pay tax under normal provision i.e Tax under Normal Provision is more than Tax under AMT.

  • Such credit can be used to the extent of difference between Regular Tax and Tax under AMT in the given year.

So in Above example:

Difference between AMT and Regular Income Tax = 9.62 – 7.41 = 2.21 lakhs can be carried forward up to 10 years.


Example of Credit and Carry Forward under AMT :

Continuing the previous example suppose in next year:


Tax credit and Carry Forward under AMT

Since Tax under Regular Provision is more than Tax under AMT, Assessee would require to pay tax at Regular Rate after taking credit of previous year's AMT as below:


Alternate Minimum Tax  carry forward and Tax Credit

We have tried to simplify the concept of Alternate Minimum Tax (AMT) in this topic also we have published video on AMT on youtube (link provided above) you can watch it for the detailed explanation.


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