| |
MAT changes tax-planning pattern of companies
B S Jindal & Akhil Jindal
The introduction of minimum alternate tax (MAT) has brought radical changes in the tax planning for companies. MAT has plugged most of the loopholes available to the companies in their exercise to avoid paying taxes. The 30 per cent of the book profit is taken as the taxable income of the assessee.The tax comes to around 12 per cent on the profit of the company. Few people are aware that this tax paid under MAT is allowed as tax credit in the future years subject to certain conditions, which are as follows:
Whereas any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year, credit in respect of tax so paid shall be allowed to him in accordance with the provisions;
The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions ofthis Act;Provided that no interest shall be payable on the tax credit allowed under sub-section (1).
The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-section (4) and sub-section (5) but such carry-forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit become allowable under sub-section (1).
The credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with provisions other than section 115JA.
Set-off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA for that assessment year.
Where as a result of an order under sub-section (1) or sub-section (3) of section 143, section 147, section154, section 155, sub-section (4) of section 245D, section 250, section 254, section 260, section 262, section 263 or section 264, the amount of tax payable under this Act is reduced or increased, as the case may be the amount of tax credit allowed under this section shall also be increased or reduced accordingly.In a nutshell, the following points should be kept in mind while planning for corporate taxes:
When a company pays tax under MAT, the tax credit allowable will be the difference between the amount payable under MAT and the assessed tax.
MAT credit is allowed to be carry-forward for the next five assessment years.
Unabsorbed MAT credit will be allowed to be accumulated within the limit of five years.
In the assessment year when the regular tax becomes payable, the difference between the regular tax and the tax computed under MAT for the year will be set off against the MAT.The Jindals are Delhi-based chartered accountants Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
|
 |
