The Finance Bill, 2026 proposes to rationalise the Minimum Alternate Tax (MAT) framework by extending MAT exclusion to additional specified businesses of non-residents opting for presumptive taxation under section 61 of the Income-tax Act, 2025. While certain foreign companies and specified non-resident businesses were already excluded from MAT, others using the same presumptive regime were not, resulting in uneven treatment. To address this, the amendment proposes excluding two more specified businesses—operation of cruise ships and provision of services or technology for setting up an electronics manufacturing facility in India—from MAT applicability. The proposal aligns MAT treatment across all specified non-resident businesses taxed on a presumptive basis. Alongside this, MAT reforms include reducing the MAT rate to 14% in the old regime, restricting MAT credit set-off for domestic companies to the new regime with a 25% cap, and clarifying carry-forward and set-off rules for both domestic and foreign companies. These changes take effect from 1 April 2026 and apply from tax year 2026–27 onwards.
Exclusion of specified business of Non-residents which are under presumptive taxation from the applicability of Minimum Alternate Tax
Certain foreign companies are excluded from the application of Minimum Alternate Tax (MAT) under the present provisions. The income of non-residents derived from certain business who opt for presumptive rate of taxation under section 61 of the Act are also excluded. However, certain other businesses who have opted for presumptive taxation under section 61 have not been so excluded.
In order to ensure similar treatment among all the different specified businesses of non-residents opting for presumptive taxation, it is proposed that two other specified businesses (business of operation of cruise ships and the business of providing services or technology for the setting up an electronics manufacturing facility in India to a resident company) shall also be excluded from the applicability of MAT
This amendment is proposed to take effect from the 1st day of April, 2026, and will accordingly apply to tax year 2026-27 and subsequent tax years.
[Clause 50]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 50 of the Bill seeks to amend section 206 of the Income-tax Act relating to special provision for minimum alternate tax and alternate minimum tax.
The said section, inter alia, provides for minimum alternate tax applicable only for companies. This tax is charged on the book profit of the assessee and not the taxable income computed under the provisions of the Act. The rate of minimum alternate tax is 15% for corporates other than units located in an International Financial Services Centre. In case the minimum alternate tax is higher than the income-tax payable on the company’s total income computed under normal tax provisions, the assessee pays minimum alternate tax and is allowed credit on the difference.
If a company pays minimum alternate tax when it is higher than regular tax, the excess amount paid is allowed as a tax credit which can be carried forward up to fifteen years and can be set off in future years where the company’s regular tax liability exceeds the minimum alternate tax liability.
It is proposed that minimum alternate tax is to be made a final tax in the old regime and shall be liable to a tax rate of 14% instead of the existing 15%. Further, set-off of minimum alternate tax credit is to be allowed only in the new tax regime for domestic companies. However, the amount of set off shall be restricted to 25% of the tax liability. In the case of foreign companies, set off is proposed to be allowed to the extent of the difference between the tax on the total income and the minimum alternate tax for the tax year in normal tax is more than minimum alternate tax.
Clause (l) of sub-section (1) of the said section provides for the provisions pertaining to minimum alternate tax shall not apply to any assessee, being a foreign company, where the total income of the assessee comprises solely of profits and gains from business referred to in section 61(2) (Table: Sl. Nos. 1, 3, 4 and 5), and such income has been offered to tax at the rates specified in the respective sections. However, certain other specified businesses of non-residents who have also opted for presumptive taxation under section 61 have not been so excluded.
It is further proposed to amend the said clause to substitute sub-clause (iii) so as to provide that the specified businesses shall also be excluded from the applicability of minimum alternate tax.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
50. Amendment of section 206.
In section 206 of the Income-tax Act,––
(a) in sub-section (1),––
(i) in clause (b), in sub-clause (ii), for the figures and symbol “15%”, the figures and symbol “14%” shall be substituted;
(ii) in clause (i), for sub-clause (ii), following sub-clause shall be substituted, namely:––
“(ii) the assessee has not utilised the credit of tax paid under section 115JAA of the Income-tax Act, 1961, in any subsequent tax year ending on or before the 31st March, 2026,”;
(iii) in clause (l), in sub-clause (iii), the brackets, words, letters and figures “(Table: Sl. Nos. 1, 3, 4 and 5)” shall be omitted;
(iv) clauses (m), (n), (o) and (p) shall be omitted;
(v) in clause (q), in the opening portion, for the word “section”, the word “sub-section” shall be substituted;
(vi) clause (r) shall be omitted;
(viii) in clause (s), for the words “which this section”, the words “which this sub-section” shall be substituted;
(b) for sub-section (3), the following sub-sections shall be substituted, namely:––
“(3) (a) The provisions of this sub-section shall be applicable only to an assessee, being a domestic company, that has exercised the option under section 200(5) or section 201(2) for a tax year, beginning on or after the 1st April 2026.
(b) Where any amount of credit, in respect of tax paid, was allowed to be carried forward to the assessee under the provisions of section 115JAA of the Income-tax Act, 1961, as on 31st March, 2026,–
(i) such credit brought forward shall be allowed to be set off in any tax year to the extent of 25% of the tax payable on the total income computed as per the other provisions of this Act for that tax year;
(ii) the remaining credit shall be carried forward to the subsequent tax year; and
(iii) such carry forward or set off of tax credit shall not be allowed beyond the fifteenth tax year immediately succeeding the tax year in which the tax credit first became allowable under section 115JAA of the Income-tax Act, 1961.
(c) Where, as a result of any order passed under this Act, tax payable under this Act is decreased or increased, as the case may be, tax credit allowed to be set off under clause (b) shall also be decreased or increased, accordingly.
(d) In case of conversion of a private company or unlisted public company into a limited liability partnership under the Limited Liability Partnership Act, 2008, the provisions of clauses (a) and (b) shall not apply 6 of 2009. to the successor limited liability partnership.
(4) (a) The provisions of this sub-section shall be applicable only to an assessee, being a foreign company.
(b) Where, any amount of credit in respect of tax paid was allowed to be carried forward to the assessee under the provisions of section 115JAA of the Income-tax Act, 1961, as on 31st March, 2026,––
(i) such tax credit shall be carried forward and set off in a tax year, when tax payable on the total income computed as per the provisions of this Act exceeds the minimum alternate tax computed as per provisions of sub-section (1);
43 of 1961.
(ii) such set off in respect of brought forward tax credit shall be allowed for any tax year to the extent of the difference between the tax liability on the total income computed as per the other provisions of this Act and the minimum alternate tax for that tax year; and
(iii) such carry forward or set off of tax credit shall not be allowed beyond the fifteenth tax year immediately succeeding the tax year in which the tax credit first became allowable under section 115JAA of the Income-tax Act, 1961.
(c) Where, as a result of any order passed under this Act, tax payable under this Act is decreased or increased, as the case may be, tax credit allowed to be set off under clause (b) shall also be decreased or increased, accordingly.
(d) In case of conversion of a private company or unlisted public company into a limited liability partnership under the Limited Liability Partnership Act, 2008, the provisions of clauses (a) and (b) shall not apply to the successor limited liability partnership.
(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee mentioned in this section.”.
