The concept of AMT for non-corporate taxpayers was introduced by the Finance Act, 2011, with effect from Assessment Year 2012-13, under Chapter XII-BA (Sections 115JC to 115JF) of the Income-tax Act, 1961.
Prior to AMT, the concept of Minimum Alternate Tax (MAT) applied only to companies under Section 115JB. AMT was introduced to apply a similar concept to non-corporate entities, such as individuals, HUFs, partnership firms, LLPs, AOPs, BOIs, and artificial juridical persons.
Applicability of AMT:
AMT applies to non-corporate taxpayers who have claimed deductions under:
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Section 10AA: Special economic zone (SEZ) profits
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Chapter VI-A (Part C): Deductions under Sections 80-IA to 80RRB (except 80P)
Such taxpayers are required to compute Adjusted Total Income and pay AMT if the regular income tax payable is less than the AMT.
🔸 Exception: AMT is not applicable to individuals, HUFs, AOPs, BOIs, and artificial juridical persons if their adjusted total income does not exceed ₹20,00,000.
Rate of AMT:
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The rate of AMT is 18.5% of the Adjusted Total Income.
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For units located in International Financial Services Centers (IFSCs) and earning only foreign exchange income, the AMT rate is reduced to 9%.
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Applicable surcharge and cess are added as per prevailing rates.
Computation of Adjusted Total Income:
Adjusted Total Income is calculated as:
Adjusted Total Income = Total income (as per normal provisions of the Income-tax Act)+ Deductions claimed under Section 10AA+ Deductions claimed under Sections 80-IA to 80RRB (except 80P)
If the tax liability on this Adjusted Total Income is more than the regular tax liability, then AMT is payable.
AMT Credit and Carry Forward – Section 115JD:
When AMT is paid, and it exceeds the regular tax liability, the excess can be claimed as AMT credit.
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AMT credit = AMT paid – Regular tax payable
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This AMT credit can be carried forward for 15 assessment years.
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In a future year, if the regular tax becomes more than AMT, the credit can be adjusted (to the extent of the difference).
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However, no interest is paid on AMT credit.
Reporting and Compliance:
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Taxpayers to whom AMT applies are mandatorily required to obtain a report from a chartered accountant in Form 29C, certifying the calculation of Adjusted Total Income and AMT.
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This report must be filed before the due date of filing ITR (as per Section 139(1)).
Example
Let’s say an LLP earns ₹60 lakhs and claims deduction under Section 80-IA of ₹30 lakhs.
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Normal taxable income = ₹30 lakhs
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Normal tax (30%) = ₹9 lakhs
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Adjusted Total Income = ₹60 lakhs
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AMT (18.5% of ₹60 lakhs) = ₹11.1 lakhs
Since ₹11.1 lakhs > ₹9 lakhs, the LLP has to pay AMT of ₹11.1 lakhs.
The excess ₹2.1 lakhs can be carried forward as AMT credit.
Key differences between AMT and MAT
| Feature | AMT | MAT |
|---|---|---|
| Applicable to | Non-corporate taxpayers (LLPs, etc.) | Companies |
| Relevant Section | 115JC to 115JF | 115JB |
| Rate | 18.5% (or 9% for IFSC units) | 15% (plus surcharge & cess) |
| Deductions targeted | 10AA, 80-IA to 80RRB (except 80P) | Book profits with adjustments |
| Credit carry forward | 15 years | 15 years |
Importance and Purpose:
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To ensure minimum tax payment by entities that reduce taxable income using deductions.
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To prevent tax avoidance through aggressive tax planning.
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To broaden the tax base and increase compliance.