Presently, the corporate entities are liable to pay 15% tax on its book profits u/s. 115JB of the Act, if the said amount is more than the tax computed under the other normal provisions of the Act. Due to the effect of surcharge, education cess and secondary and higher education cess, the effective rate of MAT worked out to be 16.995%.

The rate of the MAT is proposed to be increased to 18%. With the reduction in the surcharge on the companies, the effective rate of MAT would be 19.9305% as compared to the effective rate of MAT being 16.995% upto and including A.Y. 2010-11. It may be kept in mind that the excess MAT paid for a year is allowed as a set off, subject to the conditions, in the subsequent year, if and to the extent, the tax as per the normal computation exceeds the MAT. The set off is permissible for a period of 10 assessment years succeeding the assessment year in which the MAT is paid.

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