What Is Mat Tax Definition

Mat or minimum alternate tax is a provision in direct tax laws to limit tax exemptions availed by companies so that they pay at least a minimum amount of corporate tax to the government.

What is mat tax definition.

Tax preference item is a type of income normally tax free that may trigger the alternative minimum tax amt for taxpayers. Under the provisions of section 115jb where the income tax calculated under the income tax act is less than 18 5 of the book profit then such book profit shall be deemed to the total income of the assessee and tax payable by the assessee shall be 18 5 on book profits. Normal tax rate applicable to an indian company is 30 plus cess and surcharge as applicable. 8 40 000 will amount to rs.

Tax 30 on rs. Tax preference item definition. Book profit of the company is rs. But here only mat on company s u s 115jb is discussed.

The minimum alternate tax mat on. Mat is a tax levied under section 115jb of the income tax act 1961. I normal tax liability or ii mat. The computation of mat on companies under the income tax act 1961 act is a complex provision as it makes certain specific mandated adjustments 1 the provisions relating to mat on companies and alternate minimum tax on llps are covered under chapters xii b and xii ba of the income tax act 1961 act.

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. The tax liability of a company will be higher of. Later it was withdrawn by the finance act 1990 but reintroduced again from 1 april 1997. Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987 vide section 115j of the income tax act 1961 it act to facilitate the taxation of zero tax companies i e those companies which show zero or negligible income to avoid tax under mat such companies are made liable to pay to the government by deeming a certain percentage of their book.

Minimum alternative tax is payable under the income tax act. Mat a brief introduction. As per the concept of mat the tax liability of a company will be higher of the following two.