All About Alternate Minimum Tax (AMT)

Alternate Minimum Tax (AMT)

Table of Contents 

1) What is AMT?

2) Applicability of AMT

3) Section 115JC (i.e. Computation of Tax Liability)

4) Calculation of Adjusted Total Income (ATI)

5) Section 115JD (i.e. AMT Credit) 

6) Exemption form AMT

7) Important Notes

1) What is AMT?

An alternative minimum tax (AMT) is a tax that ensures that taxpayers pay at least this minimum amount. AMT is an additional income tax that is calculated alongside regular income tax. It requires certain taxpayers to determine their liability twice: once using regular income tax rules, and once using AMT rules. They then must pay whichever amount is higher.

2) Applicability of AMT

a) AMT is applicable to all assessees.

b) AMT shall be applicable if Adjusted Total Income (ATI) is more than Rs. 20 Lakhs in case of Individual, HUF, AOP, BOI,  Artificial Judicial Person.

c) AMT applicability mandatory for Firm including LLP, Local Authority.

d) The provision of AMT also applies if the assessee is claiming deduction under Section 10AA, 35AD, 80IA to 80RRB (except 80P).

3) Section 115JC of Income Tax Act, 1961 (i.e. Computation of Tax Liability)
Particulars Amount (in Rs.)
Tax liability computed as per normal provisions of the Income-tax Act  XXX
18.5% of Adjusted Total Income (ATI) (surcharge, if applicable + 4% Cess) XXX
Tax liability of the taxpayer Higher of the above
4) Calculation of Adjusted Total Income (ATI)

Adjusted total income is calculated in the following manner:

Particulars Amount (in Rs.)
Total Income as per normal provisions of the Income-tax Act (A) XXXXX
Add: i) Deduction claimed if any under Section 10AA (B) XXXXX
     ii) Deduction claimed if any under chapter VI-A (Section 80IA to 80RRB except 80P)  (C)   XXXXX
   iii) Deduction claimed if any under Section 35AD (D) XXXXX
Total Income (E) = (A)+(B)+(C)+(D) XXXXX
Less: Deprecation allowable as per Section 32 assuming that deduction under Section 35AD was not allowed on the assets on which deduction is claimed XXXXX
Adjusted Total Income XXXXX
5) Section 115JD (i.e. AMT Credit)

→ if AMT > Normal Income Tax then excess shall be treated as AMT credit. 

→ AMT credit can be carried forward and set off for 15 years.

→ Credit can be set off in the year in which regular tax is more than AMT.

→ The credit amount (allowed to be set off) will be restricted to the difference between the regular income tax computed under the normal provision of income tax & the AMT.

6) Exemption form AMT

a) AMT shall be applicable if Adjusted Total Income (ATI) is up to Rs. 20 Lakhs in case of Individual, HUF, AOP, BOI,  Artificial Judicial Person.

b) where the unit of assesses is located in International Financial Service Centre (IFSC) & drives its income solely in convertible foreign exchange, then AMT is applicable @9% instead of  18.5%.

c) AMT is also not applicable to the Company (i.e. provision of Minimum Alternate Tax (MAT) is applicable to the company). 

7) Important Notes

a) All other provisions of the Income Tax Act shall apply to assesses like advance tax, interest under Section 234A/B/C.

b) All taxpayers to whom AMT provisions are applicable are required to obtain a report from Chartered Accountant certifying that adjusted total income and AMT have been computed as per provisions of Income-tax Act, in Form No. 29C. Such a report needs to be furnished on or before the due date for filing the return of income. The report can be filed electronically along with the return of income.

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Article Written By: Deepesh Goyal

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