CA Amit Maheshwari
Article explains what is Alternate Minimum Tax (AMT), When to Apply AMT and its rate , Need For AMT, Applicability of Alternate Minimum Tax (AMT), Non Applicability of Alternate Minimum Tax (AMT), Rate of AMT, Credit & carry Forward of AMT, Some Key Points related to AMT and calculation of AMT with the help of example.
As per section 115JC of Income Tax Act,1961, AMT is Alternate Minimum Tax computed on the adjusted total income of a non-corporate assessee.
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 that person for such previous year and he shall be liable to pay income-tax on such total income at the rate of 18.5%.
Note: Where the person referred to therein, is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, the rate of AMT will be 9%.
AMT is introduced in the Act, to reach and collect minimum taxes from the Non Corporate Assessees who are claiming certain profit linked deductions. AMT is payable when Tax as per normal provisions is less than Alternate Minimum Tax on Adjusted Total Income.
1. The primary condition for applicability of AMT is that the assessee should be Non Corporate.
2. Such assessee should have claimed deduction under
AMT is not applicable if:
1. The Assessee is a corporate assessee
2. The Assessee is an Individual, HUF, AOP, BOI (whether incorporated or not ),Artificial Judicial Person and its Adjusted Total Income does not exceed Rs 20 Lakhs .
Hence, it can be said that AMT is applicable to Individual , HUF, AOP . BOI, Artificial Judicial Person, only if two conditions are satisfied:
|Total Income of the assessee under normal provisions of the Act||xxx|
|Deduction claimed under Chapter VI heading C ( 80 H to 80 RRB except u/s 80P )|
|Deduction claimed under section 10AA||Xxx|
|Deduction claimed under section 35AD||Xxx|
|Depreciation allowed u/s 32 of the Act as if no deduction u/s 35 AD in respect of such assets was allowed.||(Xxx)|
|Adjusted Total Income||Xxx|
For AY 2020-21, the basic rate of AMT is 18.5 % which is increased by surcharge and Education & Secondary Higher Education Cess, as the case may be. It is summariesd as below:
|In case of firms/ cooperative society||Any other Non Corporate assessee|
|If Adjusted Total Income is exceeds 50 lakhs but upto Rs 1 crores||19.24%||21.164%|
|If Adjusted Total Income exceeds Rs 1 crore.||21.5488%*||22.126%*|
*Surcharge in case of firms/ cooperative societies is 12% and
For other cases like individual, HUF, etc – Surcharge if Adjusted Total Income is exceeding 50 lakhs but upto Rs 1 crores will be 10% and If Adjusted Total Income exceeds Rs 1 crore will be 15%.
AMT is payable if the normal tax liability is less than the AMT liability ( AMT > Normal Tax).
If in any year AMT is payable then the difference between the Normal Tax Payable and AMT paid is allowed as AMT Credit and can be adjusted with normal tax liability in subsequent/ future year in which the normal income tax payable exceeds the AMT . AMT Credit can be carried forward upto 10 years.
Example: An Individual assessee in AY 2020-21 having total income of Rs 40 lakhs and has claimed deduction under Chapter VI A heading C of Rs 30 lakhs.
Normal Tax Calculation:
|Total Income :||40 lakhs|
|Less Deduction u/c VI A heading c:||30 lakhs|
|Taxable Income:||10 lakhs|
|Tax Payable:||1.28 lakhs|
Adjusted Total Income:
|Taxable Income under normal Tax Provisions:||10 Lakhs|
|Add: Deduction u/c VI A heading c:||30 Lakhs|
|Adjusted Total Income:||40 Lakhs|
|AMT Payable:||7.62 Lakhs|
Since AMT payable is more than the Normal Tax Payable, the assessee will pay tax of Rs 7.62 lakhs. However, he will get tax credit of Rs 6.34 Lakhs ( 7.62-1.28) which can be carried forward and set off upto 2030-31.
Now, suppose in next year the assessee has total income of Rs 50 lakhs and deduction u/c VI A heading C is Rs 5 lakhs, then:
Normal Tax Calculation:
|Total Income :||50 lakhs|
|Less Deduction u/c VI A heading c:||5 lakhs|
|Taxable Income:||45 lakhs|
|Tax Payable:||12.10 lakhs|
Adjusted Total Income:
|Taxable Income under normal Tax Provisions:||45 Lakhs|
|Add: Deduction u/c VI A heading c:||5 Lakhs|
|Adjusted Total Income:||50 Lakhs|
|AMT Payable:||9.53 Lakhs.|
Since, the Normal Tax Payable is more than the AMT payable, the assessee will pay the Normal tax of Rs 12.10 Lakhs. Also, the assessee will get AMT credit of 6.34 lakhs available to him.
(Author can be reached at [email protected])
(Republished with Amendments)