CA Rohit Krishan Varshney

CA Rohit Krishan VarshneyBackground and Provisions

The Alternate Minimum Tax (AMT) is income tax imposed by the United States federal government on individuals, corporations, estates and trusts. The AMT was enacted in 1982.

This concept was taken by India in the Finance Act, 2011. Finance Act, 2011 introduced a new “Chapter XIIBA” to provide payment of Alternate Minimum Tax (AMT) by LLPs and after that it has been amended by Finance Act, 2012 in which it is covered all non-corporate assesses. However, AMT is not payable by Individual, HUF, Association of Persons/ Body of Individuals and Artificial judicial person if adjusted total income of such person does not exceed Rs 20 Lac.

The AMT is required to be paid  at the rate of eighteen and half percentage as increased by education cess and higher secondary education cess i.e. 19.055%. The AMT is payable only if the tax payable under the normal provision is lesser than AMT.

AMT will also apply to the assesses claiming profit linked deductions Part C of Chapter VI-A i.e. under section 80-IA to 80RRB and under section 10AA. However, deduction under section 80P shall not be added back. Also Deduction under section 80C to 80GGC, 80U and 80TTA shall not be added back.

Further we have to say that if a person claims deduction under section 35AD, then he is not eligible to claim deduction under section 80-IA/ 80-IB/ 80-IC/ 80-ID. So, a person claims deduction under section 35AD is not liable to pay AMT. Therefore, it is beneficial to the assessee to claim deduction under section 35AD rather than to claim deduction under section 80-IA/ 80-IB / 80-IC/80-ID.

The assessee has profits and gains of business or profession on presumptive basis under section 44AD, 44AE, 44B, 44BB, 44BBA and 44BBB. Section 44AD does not apply to taxpayers claiming profit linked tax holiday. Therefore, total income is computed taken into account profits and gains of business or profession on presumptive basis. If the assessee is eligible to take deduction under section 1 0AA or deduction under Chapter VI-A, then such deductions shall be added back to the total income for computation of adjusted total income.

Calculation of Adjusted Total Income

Total income as per normal provision of Income Tax Act                        xx

Add: Deduction under Part C of Chapter VI-A (Except Section 80P)          xx

Add: Deduction under section 1 0AA (Profits of SEZ units)                      xx

AMT Credit

Section 11 5JD of the Act provides for tax credit of AMT. The Tax credit is allowed for that assessment year in which AMT is excess than tax payable under normal provisions. The tax credit is allowed for next 10 assessment year in which tax payable under normal provisions is more than AMT.

Illustration-

Ques:- If a LLP has net profit as per profit and loss account relating to the year ended on 31/03/2013 R 248 Lac and paid R 2 Lac as advertisement published in the souvenir released by BJP. Deduction of R 200 Lac is also available to the LLP. Compute the tax liability.

Ans:-  Computation of Total Income

Particulars (Rs In Lac)
Gross Total Income 248.00
Less: Deduction U/S 80GGC 2.00
Less: Deduction U/S 80-IE 200.00
Total Income 46.00
Tax Liability @ 30.9% 14.214

Computation of Adjusted Total Income            

Particulars (Rs In Lac)
Total Income 46.00
Add: Deduction U/S 80-IE 200.00
Adjusted Total Income 246.00
Tax Liability @ 19.055% 46.8753
Tax Payable  (Higher of Tax on Adjusted Total Income and Total Income) 46.8753
AMT Credit 32.6613
AMT can be carried forward upto Assessment Year 2023-24.

Report

As per section 115JC of the Income Tax Act, 1961, an assessee is liable to AMT should obtain a report in Form No- 29C prescribed under Rule 40BA from CA certifying the adjusted total income and the alternate minimum tax duly computed and furnish the report on or before the due date of filing the return u/s 139(1).

ICAI Guidance Note

ICAI through a Guidance Note clarified the following points to be included in CA reports-

The report consists of three paragraphs-

1-  The First paragraph contains the declaration about the examination of accounts and records of non- corporate assessee in order to arrive at adjusted total income and the alternate minimum tax.

2-   The Second paragraph involves certification of computation of adjusted total income and the alternate minimum tax and also the tax payable under section 115JC.

3- The Last paragraph requires expression of the opinion that the particulars given in Annexure A are true and correct.

Further ICAI clarified that Annexure A consists following points-

1-    Name of the Assessee

2-    Address of the Assessee

3-    Permanent account Number

4-    Assessment Year

5-    Total Income of the Assessee as per manner laid down in Income Tax Act.

6-    Income Tax Payable on total income referred in column 5 above.

7-    The amount of deduction claimed under Part C of Chapter VI-A (except section 80P)

8-    The amount of deduction claimed under section 1 0AA

9-    Adjusted total income of the assessee (5+7+8)

10- Alternate Minimum Tax (19.055% of column 9 above)

Conclusion

  • It can be concluded that the ICAI has imposed the higher responsibility on the CA to examine the records and certifying the correct Alternate Minimum Tax through his report.
  • It is a good concept to collect the minimum tax revenue from higher income earning assesses and restricts the tax evasion.
  • The Government is able to plan the future programmes for the further development.
  • Now a day, devaluation of rupees is a main problem for the India. So imposition of this tax will reduce the luxury good’s demand like gold etc. and save the rupees value.

Author’s opinion

If Government abolishes the present tax slabs rate and implement a fixed rate 18.5% for every assessee, then Government can be collected higher revenue in comparison to the present revenue. In this way, almost all assesses can be in the sphere of tax.

(Author is a member of ICAI. He can be reached at +91 9911000290 or carohitkvarshney@gmail.com.)

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7 responses to “Alternate Minimum Tax – Section 115JC”

  1. Pralhad says:

    Does section 115JC apply to trust Whose income Does not exceed Rs.20Lacs

  2. jagdish magatarpara says:

    Hi. Can SEZ (firm) also take credit of AMT after finish it Ten years.

  3. CA Dr. VISHNU BHARATH ALAMPALLI says:

    Nice article, my compliments to you, I would like to know if the partnership firm has Income with out claiming any exemptions/deductions, and have set off of CARRY FORWARD LOSS, whether AMT is applicable as they are setting off the loss and not paying any tax. I will be thnkfull for the replay.

  4. Satish Garg says:

    IF WE HAVE AVAILED DEDUCTION U/S 35AD IN LAST YEAR AND LAST YEAR AMT (Alternative Minimum Tax) IS NOT APPLICABLE IN CASE OF AVAILMENT OF 35AD DEDUCTION. NOW WE ARE CONFUSED ABOUT TO APPLICABILITY OF AMT IN CASE OF AVAILING LOSS CARRY FORWARD AND SET OFF IN CURRENT PREVIOUS YEAR.

    REPLY AS SOON AS POSSIBLE…….

  5. Abhinav says:

    @suma. 80GGC deduction not considered because deduction claimed under Chapter VI-A heading “C” only to be added back and 80GGC doesn”t come in heading “C”.

  6. Prateek Garg says:

    Sir,

    What will be the status of AMT Credit set off in the year in which if we doesn’t claim any deduction due to which AMT is payable i.e. AMT provisions not applicable for tax calculation.

  7. Suma says:

    In the calculation of Adjusted Total Income, why hasn’t 80GGC deduction been considered?

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