AMT is different from MAT. The difference between MAT and AMT is as follows. Read the complete article to know what is Alternative Minimum Tax, Calculation, AMT Rates, features and provisions of AMT.
What is Alternative Minimum Tax (AMT)?
MAT is only applicable for the corporate taxpayer. Whereas Alternative Minimum Tax provisions are applicable to non-corporate taxpayers. In short, we can say that Minimum Alternate Tax applies to companies and AMT applies to a taxpayer other than a company. Section 115JC to Section 115JF gives the provisions relating to AMT.
The AMT will be applicable to every non-corporate taxpayer/assessee who has claimed
- Deduction under Section 35AD.
- Deduction under Section 80H to Section 80RRB (except Section 80P).
- Deduction under Section 10AA.
The provisions of Alternative Minimum Tax are not applicable for the non-corporate taxpayer who has not claimed any deduction mentioned above.
The AMT is applicable to an individual or HUF (Hindu Undivided Family) or an AOP (Association of Persons) or a BOI (Body of Individuals) (whether incorporated or not) or an artificial juridical person only if the adjusted total income of such person is more than Rs. 20,00,000.
The AMT provisions shall apply to every other person (i.e. other than HUF, individual, AOP, BOI or artificial juridical person) irrespective of its income.
In the case of a non-corporate taxpayer, Alternate Minimum Tax is levied at the rate of 18.5% of adjusted total income. Surcharge and Cess will also be levied (as applicable).
Adjusted Total Income
The AMT is levied @ 18.5% of adjusted total income in case of a non-corporate taxpayer. The computation of this adjusted total income is as follows.
|Taxable Income of the Tax Payer||XXXX|
|Adjusted total income||XXXX|
Alternative Minimum Tax Computation/Calculation
As per the AMT act, the Alternative Minimum Tax liability of a non-corporate taxpayer will be higher of the following:
- The tax liability of a non-corporate taxpayer computed as per the normal provisions of the Income Tax Law, i.e., the tax computed on the taxable income of the taxpayer/assessee by applying the tax rate applicable to him. Such tax can be termed as a normal tax liability.
- Tax computed at the rate of 18.5% on adjusted total income. Adjusted total income is described above. The tax computed by applying 18.5% (plus surcharge & cess as applicable) on adjusted total income is called Alternate Minimum Tax.
The taxable income for the year 2015-16 of Mr. Song Joong Ki (resident and age 30 years) as per the provisions of IT Act = Rs. 28,40,000.
After deduction under section 80QQB, the taxable income has been computed in respect of royalty on books = Rs. 2,00,000.
Here, Mr. Song Joong Ki has claimed deduction under section 80QQB and his adjusted total income is more than Rs. 20,00,000 and, hence, the AMT will apply to him. By applying the provisions of AMT, the tax liability of Mr. Song Joong Ki is calculated as per the computations that are given above.
- Mr. Song Joong Ki’s taxable income = Rs. 28,40,000. By applying the Tax Rates applicable to an individual below the age of 60 years for the AY (assessment year) 2017-18, tax on Rs. 28,40,000 = Rs. 6,77,000. Tax liability including cess of 2% and 1% = Rs. 6,97,310.
- Adjusted total income = Rs. 30,40,000 (Rs. 28,40,000 + Rs. 2,00,000, i.e., deduction under section 80QQB). AMT at the rate of 18.5% on Rs. 30,40,000 = Rs. 5,62,400. AMT liability after cess of 2% and 1% = Rs. 5,79,272.
Thus, the tax liability of Mr. Song Joong Ki will be Rs. 6,97,310 (plus cess as applicable) because the liability as per the normal provisions of the Income Tax Act is more than the liability as per the provisions of AMT (Alternative Minimum Tax).
Features and Provisions of AMT
The features and provisions of AMT (Alternative Minimum Tax) are as follows.
In the case of a non-corporate taxpayer to whom the AMT applies has to pay higher of tax liability as per the provisions of AMT or normal tax liability. If in any year the taxpayer/assessee pays liability as per the provisions of AMT, then he is entitled to claim AMT credit in the subsequent year(s) of the excess Alternate Minimum Tax paid over the normal tax liability.
Adjustment of carried forward AMT credit
As mentioned above, a non-corporate taxpayer to whom the AMT provisions applies can claim Alternative Minimum Tax Credit of excess AMT paid over the normal tax liability. The taxpayer can utilize the AMT credit in the subsequent year(s). The credit of AMT can be adjusted in the year in which the normal tax liability is more than the AMT liability.
Period for which AMT credit can be carried forward
As mentioned above, a non-corporate taxpayer to whom the AMT provisions applies can carry forward the credit of AMT for adjustment in subsequent year(s). However, the Alternative Minimum Tax credit can be carried forward only for a period of 10 years. After that period, it will lapse (become invalid). i.e., No interest is paid to the taxpayer/assessee in respect of such credit.
Report from CA (Chartered Accountant)
The non-corporate taxpayer to whom the AMT provisions apply is required to obtain a report from CA (chartered accountant) in the Form 29C. The report should be obtained on or before the due date of filing the Income Tax Return.