All about Alternate Minimum Tax

 Yash Shah

ALTERNATE MINIMUM TAX (AMT) [SEC.115JC TO 115JF]

Where the regular Income Tax payable for a Previous Year by a person (other than a company) is less than the Alternate Minimum Tax payable for such Previous Year, the Adjusted Total Income shall be deemed to be the total income of such person and he shall be liable to pay Income-tax on such Total Income at the rate of 18.5% [Section 115JC(1)]

Note: Where the person is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, then the above-mentioned rate of 18.5% will be substituted with 9%.

To whom Alternate Minimum Tax shall be applicable [Section 115JEE (1)]

The provisions of Alternate Minimum Tax shall apply to a non-corporate assessee who has claimed any deduction under:

(a) Sections 80-IA to 80RRB other than section 80P; or

(b) Section 10AA; Or

(c) Section 35AD

To whom Alternate Minimum Tax shall not be applicable [Section 115JEE (2)]

The provisions of Alternate Minimum Tax under Chapter XII-BA shall not apply to-

(a) an Individual; or

(b) a Hindu Undivided Family; or

(c) an Association of Persons or a Body of Individuals (whether incorporated or not) or

(d) an Artificial Juridical Person referred to in section 2(31) (vii),

if the Adjusted Total Income of such person does not exceed Rs.  20,00,000

(e) a person who has exercised the option referred to in section 115BAC or section 115BAD (With Effect From 01 April, 2021)

Steps involving calculation of Tax where Alternate Minimum Tax provisions applies:

Step 1: Calculate the regular Income-tax liability of the non-corporate assessee ignoring the provisions of Sections 115JC to 115JF.

Step 2: Calculate Adjusted Total Income of the non-corporate assessee.

Step 3: Calculate Alternate Minimum Tax by applying 19.24 percent (18.5 % + 4% Cess) or 22.126 percent (18.5% + 15% Surcharge + 4% Cess) in case Adjusted Total Income exceeds Rs 1 crore but less than 2 crore, on Adjusted Total Income computed under Step 2.

Step 4: Compare tax liability computed under Step 1 and Alternate Minimum Tax computed under Step 3. If amount computed under Step 1 is equal to or more than amount computed under Step 3, then the provisions of Alternate Minimum Tax will not apply.

Step 5: If amount computed under Step 1 is less than amount computed under Step 3, then amount computed under Step 3 will be deemed as tax liability of the non-corporate assessee for such Previous Years. In this case, the excess amount computed under Step 3 over the amount computed under Step 1 will be available as credit and can be carried forward and set off against regulars tax liability of the non-corporate assessee of the next year or subsequent years.

Report from an accountant [Section 115JC(3)]:

Every non-corporate assessee to whom this section applies shall obtain a report, before the specified date referred to in section 44AB, in such form as may be prescribed, from an accountant referred to in the Explanation below sub-section (2) of section 288, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter and furnish such report by that date. (With Effect From 01 April, 2020)

Tax credit for AMT:

Section 115JD provides the credit for tax (tax credit) paid by a non-corporate on account of AMT under Chapter XII-BA shall be allowed to the extent of the excess of the AMT paid over the regular Income-tax. This tax credit shall be allowed to be carried forward up to the tenth Assessment Year immediately succeeding the Assessment Year for which such credit becomes allowable. It shall be allowed to be set off for an Assessment Year in which the regular income-tax exceeds the AMT to the extent of the excess of the regular Income-tax over the AMT. No interest shall be payable on tax credit allowed under section 115JD.

For the purpose of the given sections:

“Adjusted Total Income” means the Total Income or Net Income of the non-corporate assessee as increased by –

(a) Amount claimed as deduction by the non-corporate assessee under sections 80H to 80RRB other than section 80P; and

(b) Amount claimed as deduction by the non-corporate assessee under section 10AA: and

(c) deduction claimed, if any, under section 35AD as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction under section 35AD was allowed in respect of the assets on which the deduction under that section is claimed.

“Alternate Minimum Tax” shall be the amount of tax computed on Adjusted Total Income at a rate of eighteen and one-half per cent.

Application of other provisions of this Act [Section 115JE]:

Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to a non-corporate referred to in this Chapter. Hence, all other provisions relating to Advance tax, interest under sections 234A, 234B and 234C penalty, etc. shall apply to such non-corporate also.