How To Calculate Tax Under Mat

14 04 000 13 00 000 1 04 000.

How to calculate tax under mat.

Every company should pay higherof the tax calculated under the following two provisions. Hence tax payable by company 20 28 000. Tax liability as per the normal provisions of income tax act tax rate 30 plus 4 edu cess plus surcharge if applicable. As per section 115jb every taxpayer being a company is liable to pay mat if the income tax including surcharge and cess payable on the total income computed as per the provisions of the income tax act in respect of any year is less than 18 50 of its book profit surcharge sc health education cess.

Total tax payable under mat 19 50 000 78 800 20 28 000. Here is tax profit means the taxable profit under the normal provsions of income tax act. This is known as mat the mat rate has been reduced to 15 from fy 19 20. Tax liability of the company computed as per the normal provisions of the income tax law i e tax computed on the taxable income of the company by applying the tax rate applicable to the company.

Mat is calculated as 15 of the book profit of the tax assesse. The amount of tax and surcharge cannot exceed the tax calculate under marginal relief tax on 1 crore 1 01 00 000 1 crore rs. Mat credit tax payable under mat tax payable on net income i e. Education cess 4 on 19 50 000 78 000.

How is mat calculated. This mat credit is now permitted to be carried forward up to 15 assessment years w e f a y 2018 19 as per section 115jaa. Mat is calculated under section 115jb of the income tax act. Tax computed in above manner can be termed as normal tax liability.

For calculating the tax outflow of company first the tax is required to be calculated as per the normal provisions under the income tax act. Many people got confused as how to considered deferred tax while calculating mat in first place whether to consider it or not in book profit calculation. Since income exceeds 1 crore marginal relief is to be calculated i e. Also the set off of mat credit is permitted in a year only when if the tax becomes payable under the normal provisions of the income tax act is greater than the tax payable under mat.

If company is required to tax under mat then the difference between the tax as per normal provsions and tax as mat provision will be recognised as mat credit under the books if virtual certainty is exists. The treatment of deferred tax charge in determining the tax liability under the special provisions of section 115jb of the income tax act is one such case. Deferred tax is always calculate on the differences between the book profits and tax profit. Minimum alternate tax calculation example.

Basic provisions of mat as per the concept of mat the tax liability of a company will be higher of the following. Under existing rules book profit is calculated as per section 115jb of the income tax act 1961. The taxable income of abc company not availing any tax exemptions incentives as per the provisions of the income tax act 1961 is rs. Under the provisions of section 115jb where the income tax calculated under the income tax act is less than 18 5 of the book profit then such book profit shall be deemed to the total income of the assessee and tax payable by the assessee shall be 18 5 on book profits.