Answer / tax beginner

The Indian Income Tax Act contains large number of
exemptions from total income. Besides exemptions, there are
several deductions permitted from gross total income.
Further, depreciation allowable under the Income Tax Act is
not the same as required under the Companies Act. The
result of such exemptions, deductions, and other incentives
under the Income tax Act in the form of liberal rates of
depreciation is the emergence of Zero tax companies which
in spite of having high book profit are able to reduce
their taxable income to nil.

The system of minimum alternate tax has accordingly been
introduced under which a company is required to pay a
minimum tax of 7 % of the book profit in case the tax on
the total income computed under the normal provisions of
law works out to less than this amount [Sec 115JB].

So if Book Profit before Depreciation for a Construction
(Infrastructure) Company is for example Rs.7,00,000/- and
after claiming for Depreciation and other exemptions Gross
Taxable Income comes down to 1,50,000/-. The Tax works out
to be Rs.45,000/- (30%).
However MAT works out to be Rs.49,000/- (Rs.7,00,000/- @
7%). The Company has to pay the MAT of Rs.49,000/-

Answer / tax beginner

I am Sorry, the current Rate of MAT is 18% increased from
15% , kindly ignore the example with old rates in above
answer , however the concept remains same.

Answer / selvakumar

MAT CALUCULATED ON BOOK PROFIT @ RATE OF 18%

Answer / devinder kumar

Now (2011-12)MAT Rate is 18.5%,And take example oue
compainy book profit is Rs.20,00,000 and you some amount

20,00,000*18.5%=370000.

Answer / rahul jain

in above example after all deduction the net taxable income
is supose 425000/-(out of total income 7 lakh)than tax on
the amount is 127500/- (@30%)and if we note mat on 7 lakh
is 129500/-(@ 18.5%) so the compay has to pay mat 129500

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