What Is Mat Credit Entitlement

A tax credit scheme is introduced by which mat paid can be carried forward for set off against regular tax payable during the subsequent fifteen years period subject to certain conditions as under.

What is mat credit entitlement.

The maximum amount of mat credit that you can claim cannot exceed the difference between the normal tax liability and the mat liability in the year for which the mat credit is being availed. In the subsequent year i e. Thus mat credit can be understood as the difference between the tax calculated under the general provisions of the income tax act. If a company has mat credit of rs.

In a case where the total income of the company. 1 lakh the tax liability as per the normal provisions for fy 2019 20 is rs. The difference arising out of mat paid and mat credit entitlement can be treated as tax paid during the year. The total mat paid during the tax holiday period is available as mat credit to be adjusted against the regular tax liability at a later point.

4 relevant extract of the budget speech 1996 97. Rs 14 43 000 rs 12 48 000 rs 1 95 000. As per the law this credit say rs 150 crore can be used to lower the regular tax liability at the end of the tax holiday. 115jaa of the income tax act 1961 mat credit is the difference between the tax paid on mat provisions and the normally computed corporate tax liability.

To mat credit entitlement account. In the year of set off of credit the amount of credit availed should be shown as deduction from the provision of taxation on the liabilities side of the balance sheet. Any company that pays minimum alternate tax under the mat clause instead of regular tax then if the tax paid is more than that accrued the excess amount is credited back as tax credit to the company. Mat credit entitlement a c dr to profit and loss a c with the amount of mat credit available the account head mat credit entitlement should be shown in the balance sheet under the head loans and advances on the assets side.

I propose to introduce a minimum alternate tax mat on companies. The asset may be reflected as mat credit entitlement. Mat credit under section 115jaa. A company is entitled to set off this amount in a subsequent a y.

Only when it pays tax according to the normal provisions. 10 lakh while that as per the. The year of set off. Mat credit and carry forward provisions indicate that it was always the intention that mat should not be a final tax on a company.

Such tax credit shall be carried forward for 15 assessment years immediately succeeding the assessment year in which such credit has become allowable. Mat credit availed a c dr. It must also be noted that deferred tax charge is not covered by any other clause of the explanation to section 115jb 2 and is therefore not required to be added back in the computation of book.