Alternative Minimum Tax (AMT), introduced for non-corporate taxpayers works on similar principles as the minimum alternate tax. However, applicability, manner of computation of adjusted income, exemption, reporting requirement etc are different compared to MAT.
Basics of Alternative Minimum Tax
As it is as clear from the name, AMT is a minimum tax that is payable alternative to normal tax. The rate of AMT is 18.5% (plus applicable surcharge and cess). AMT is a tax to be paid on ‘adjusted total income’ in a FY wherein tax on normal income is lower than AMT on Adjusted total income. So, AMT has to be paid by taxpayers to whom AMT provisions apply.
Applicability of AMT
As already mentioned, initially the concept of minimum tax was introduced for companies and then made applicable to non-corporate taxpayers. Finance Act, 2011 introduced AMT on Limited Liability Partnership (LLP) and Finance Act 2012 amended the provisions as it stands today. Accordingly, AMT provisions are applicable to the following taxpayers:
All non-corporate taxpayers; and
Taxpayers who have claimed deduction under:
Chapter VI-A under the heading “C. -- Deductions in respect of certain incomes’ - These deductions are under Section 80H to 80RRB provided in respect of profits and gains of specific industries such as hotel business, small scale industrial undertaking, housing projects, export business, infrastructure development etc. However, deduction under Section 80P which provides deduction to co-operative societies is excluded for this purpose; or
Deduction under Section 35AD - While capital expenditure in assets usually qualify for depreciation year on year, under this Section 100% deduction is allowed on capital expenditure incurred for specified business such as the operation of cold chain facility, fertilizer production etc; or
Profit linked deduction under Section 10AA - Deduction of profit varying from 100% to 50% is provided to units in Special Economic Zones (SEZs).
Based on the above, it can be concluded that AMT provisions are applicable only to those non-corporate taxpayers having income under the head ‘Profits or Gains of Business or Profession’.
Further, as mentioned above AMT provisions are applicable only when normal tax payable is lower than AMT in any Financial Year.
Exemption from Alternate Minimum Tax
AMT provisions are not applicable to an individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI) and the artificial juridical person whose adjusted total income does not exceed Rs 20,00,000.
Therefore, this exemption based on the monetary threshold of adjusted total income is not applicable to LLPs, partnership firms and other non-corporate assessees.
Calculation of Adjusted Total Income
Adjusted total income and AMT arrives in the following manner:
Taxable Income( A) - xxxx
Add: Deduction claimed (Chapter VI-A from 80H to 80RRB except 80P (B)) xxx
Deduction claimed if any under Section 10AA (C) xxx
Deduction claimed if any under Section 35AD
reduced by regular depreciation allowed (D) xxxxx
Adjusted total income (E) = (A)+(B)+(C)+(D) xxxx
AMT - 18.5% of (E) xxxx
Tax Liability @ AMT Provisions are Applicable
Tax liability computed as per normal provisions of the Income-tax Act - xxxx
AMT computed at 18.5% (plus applicable surcharge and cess) - xxxx
Tax liability of taxpayer -xxxx
AMT Credit
Though AMT was introduced to collect tax from zero tax companies, it was also with the intention of having a consistent flow of tax to the public fund. Therefore, while minimum tax is being levied in an FY wherein normal tax is lower than AMT, in subsequent FYs wherein AMT is lower than normal tax, AMT paid earlier is allowed to be carried forward and reduced against normal tax to the extent of the difference between normal tax and AMT. Balance if any after such set off can be carried forward to subsequent FYs. This concept is called AMT Credit. However, AMT Credit is not allowed to be carried forward for only upto 15 FYs succeeding the FY in which such AMT is paid.
In case of any change in normal tax due to any order passed by income tax department, AMT credit will also change accordingly.
Further, if the taxpayer has any foreign tax credit (tax paid in foreign countries with which India has bilateral or unilateral tax agreement) to be claimed against AMT, any FTC in excess of AMT shall be ignored.
Compiled by team
Team Ca Sunil sakral
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