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:
Non-Corporate Assessee whose ADJUSTED TOTAL INCOME does not exceed Rs.20 lakhs
What is ADJUSTED TOTAL INCOME?
Calculation of Adjusted Total Income:
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.
Example: Tax Calculation under AMT
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:
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:
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.