Suggestion on Clause 46(b) of Finance Bill 2017- – Section 115JAA(2A) – Restriction on carry forward of MAT/AMT credit and claim of FTC in relation to taxes under dispute – Restriction to be removed

In line with Rule 128(7), the Finance Bill 2017 proposes to insert second proviso to section 115JAA(2A) restricting quantum of MAT credit to be carried forward to subsequent years. The proposed proviso provides that where the amount of FTC available against MAT/AMT is in excess of FTC available against normal tax, MAT/AMT credit would be reduced to the extent of such excess FTC.

Similar restriction is proposed to be inserted in S. 115JD(2) on AMT credit.

Both the provisions are proposed to be effective from the 1 April, 2018 i.e. will apply in relation to A.Y. 2018-19 and onwards as specifically provided in Notes on Clause and Memorandum to the Finance Bill.

The rationale of aforesaid restriction/limitation is not clear. The restriction on quantum of MAT/AMT credit to be carried forward subjects taxpayer to duplicated MAT liability while denying the rightful carryover of MAT/AMT credit.

The FTC credit is an alternative form of tax payment. For all purposes including for grant of refund or levy of interest, FTC is treated as advance tax paid to the extent the same is creditable against tax liability in India. Once MAT liability is admitted to be tax liability on income in India, there is no justifiable reason for treating FTC separately depending on whether FTC is creditable against normal tax liability or MAT liability. The proposed amendment is inconsistent with the Government’s assurance that MAT is to be effectively phased out and incidence of MAT is to be counter matched by grant of extended period of MAT credit.


The proposed restriction on carry forward of MAT/ AMT credit may be removed.

Source- ICAI Post-Budget Memoranda-2017

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