What Is Mat Tax Definition

It was first introduced by the finance act 1987 and made effective from ay 1988 89.

What is mat tax definition.

8 40 000 will amount to rs. Book profit of the company is rs. Later it was withdrawn by the finance act 1990 but reintroduced again from 1 april 1997. The tax liability of a company will be higher of.

Tax preference item definition. Tax 30 on rs. Mat is a tax levied under section 115jb of the income tax act 1961. 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.

Normal tax rate applicable to an indian company is 30 plus cess and surcharge as applicable. As per the concept of mat the tax liability of a company will be higher of the following two. The minimum alternate tax mat on. A value added tax vat is a consumption tax placed on a product whenever value is added at each stage of the supply chain from production to the point of sale.

Mat a brief introduction. The key reason for introduction of mat is to ensure minimum levels of taxation for all domestic and foreign companies in india. I normal tax liability or ii mat. Mat or minimum alternate tax is a provision in direct tax laws to limit tax exemptions availed by companies so that they pay at least a minimum amount of corporate tax to the government.

But here only mat on company s u s 115jb is discussed. Minimum alternative tax is payable under the income tax act. Tax preference item is a type of income normally tax free that may trigger the alternative minimum tax amt for taxpayers.