Meaning:
MAT is a provision under Section 115JB of the Income Tax Act, designed to ensure that companies with substantial book profits cannot avoid paying taxes through various exemptions and deductions.
If the income tax payable under the normal provisions of the Act is less than 15% of book profit, the company must pay MAT @ 15% of book profit (plus surcharge & cess).
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⚙️ How It Works:
1. Compute Book Profit as per the Companies Act, starting from net profit in the Profit & Loss account.
2. Make specific adjustments (additions & deductions) as prescribed under Section 115JB, such as:
• Add back: Income-tax paid/provisions, deferred tax, provisions for unascertained liabilities, etc.
• Deduct: Exempt income (like Section 10(38) capital gains), depreciation (excluding revaluation), etc.
3. Compare:
• Normal Tax Liability (as per Income Tax Act)
• MAT Liability (15% of Book Profit)
➤ The higher of the two is payable.
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📘 MAT Credit (Section 115JAA):
If MAT paid is more than normal tax, the difference is allowed as credit and can be carried forward for 15 years, to be set off when normal tax exceeds MAT in future years.
Regards
Shining Stars 🌟🌟🌟
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