Please Help: tax query
Posted Date : 25-Oct-2012 , 12:44:02 pm | Posted By Ravi Sanguri
What is MAT Credit?? How We Can Adjust it in Subsequent Year??
Category : Income Tax | Answers : 2 | Comments : 3 | Hits : 363
Answers
Answer By: AKHIL MAHESHWARI
Dear Ravi, The concept of Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but who were not contributing to the Govt by way of corporate tax, by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage of book profit as minimum alternate tax.
Section 115JB, inserted by the Finance Act, 2000 has cast a responsibility on the chartered accountant to certify that the book profit has been computed in accordance with the provisions of the Income-tax Act. He has also to certify the income-tax payable by the company.
Go through the example given below, u will understand the provision clearly.
1. Every company required to compute tax both under the income tax and under sec 115 JB
2. Profit computed under the income tax is called regular profit and the tax under this method is called regular tax
3. profit computed under sec 115jb is called Book profit and the tax computed is called MAT.
4. every year a company required to compute the tax under the both methods and required to pay higher of those.
5. the company which has paid the MAT in any year can carryforward to the next subsequent years to setoff against the tax liability in which it pays the regular tax.
6. However a company is not required to compute its book profit and pay the MAT in the in year in which it has its regular profit itself “nil” or “loss” . For eg see “@” column , where MAT has not been paid. But the MAT paid in the earlier years is eligilble to be carryforward.
7. there are some conditions how much MAT can be carryforward and how much MAT can be utilized to sett of f the tax
MAT CREDIT AVIALMENT
TO THE EXTENT OF THE MAT PAID EXCESS OF THE REGULAR TAX CAN BE TAKEN AS CRDIT AND CAN BE CARRY FORWORD TO THE NEXT SUBSEQUENT YEARS .
See the eg : column “#” where the regular tax is 10, but the MAT is 40, so to the extent of the higher of the MAT paid over and above the regular tax means 40-10 = 30 is taxken as credit.
MAT CREDIT UTILISATION
Lower of the follwing is available for utilization of the credit
(i)MAT credit
(ii) The extent of the higher of the regular tax paid over and above MAT
Eg: see column “$”
Regular tax is 100
MAT is 30
The extent of the higher of regular tax over and above the MAT is 100 – 30 = 70
MAT Credit avalialability is 80
So lower of the above is70
So now 70 can be sett of against the regular tax and only the remaining balance.Rs. 30 is to be paid
Note: In any case Govt gets A Minimum of Tax from the company. Except the situation where the companies regular profit it self is nill or loss.
Section 115JB, inserted by the Finance Act, 2000 has cast a responsibility on the chartered accountant to certify that the book profit has been computed in accordance with the provisions of the Income-tax Act. He has also to certify the income-tax payable by the company.
Go through the example given below, u will understand the provision clearly.
1. Every company required to compute tax both under the income tax and under sec 115 JB
2. Profit computed under the income tax is called regular profit and the tax under this method is called regular tax
3. profit computed under sec 115jb is called Book profit and the tax computed is called MAT.
4. every year a company required to compute the tax under the both methods and required to pay higher of those.
5. the company which has paid the MAT in any year can carryforward to the next subsequent years to setoff against the tax liability in which it pays the regular tax.
6. However a company is not required to compute its book profit and pay the MAT in the in year in which it has its regular profit itself “nil” or “loss” . For eg see “@” column , where MAT has not been paid. But the MAT paid in the earlier years is eligilble to be carryforward.
7. there are some conditions how much MAT can be carryforward and how much MAT can be utilized to sett of f the tax
MAT CREDIT AVIALMENT
TO THE EXTENT OF THE MAT PAID EXCESS OF THE REGULAR TAX CAN BE TAKEN AS CRDIT AND CAN BE CARRY FORWORD TO THE NEXT SUBSEQUENT YEARS .
See the eg : column “#” where the regular tax is 10, but the MAT is 40, so to the extent of the higher of the MAT paid over and above the regular tax means 40-10 = 30 is taxken as credit.
MAT CREDIT UTILISATION
Lower of the follwing is available for utilization of the credit
(i)MAT credit
(ii) The extent of the higher of the regular tax paid over and above MAT
Eg: see column “$”
Regular tax is 100
MAT is 30
The extent of the higher of regular tax over and above the MAT is 100 – 30 = 70
MAT Credit avalialability is 80
So lower of the above is70
So now 70 can be sett of against the regular tax and only the remaining balance.Rs. 30 is to be paid
Note: In any case Govt gets A Minimum of Tax from the company. Except the situation where the companies regular profit it self is nill or loss.
Answer By: Anmol Goyal
Comments
Nikhil
27-Oct-2012 , 02:02:57 pmYes you can adjust MAt in Subsequents year..
Amir
11-Dec-2012 , 04:59:35 pmMat credit is a tax paid in addition to the regular income tax.say your regular tax is 200000 and mat is 300000 then you would get credit of Rs. 100000 i.e over and above the regular tax. this mat credit entitlement is utilised over a period of 10 years from the year suceeding the assessment year in which the credit is first time availed. this crdeit is utilised to the extent of regular tax over mat of that year.
Amir
11-Dec-2012 , 05:00:51 pmNicely mentioned by akhil maheshwari.