Alternative Minimum Tax
1. As it is evident from the name, AMT is a minimum tax that is leviable alternative to normal tax. Rate of AMT is 18.5% (plus applicable surcharge and cess).
2. If the person is a unit located in an International Financial Services Centre (IFSC) and receives income solely in convertible foreign currency, the AMT rate will be 9%.
3. AMT is a tax levied on ‘adjusted total income’ in a FY wherein tax on normal income is lower than AMT on Adjusted total income. So, irrespective of normal tax, AMT has to be paid by taxpayers to whom AMT provisions apply.
Applicability of AMT
As already mentioned, initially the concept of minimum tax was introduced for companies and progressively made applicable to non-corporate taxpayers. Finance Act, 2011 introduced AMT on Limited Liability Partnership (LLP) and Finance Act 2012 amended the provisions as it stands today. Accordingly, AMT provisions are applicable to following taxpayers:
- All non-corporate taxpayers; and
- Taxpayers who have claimed deduction under:
- Chapter VI-A under the heading “C. — Deductions in respect of certain incomes’ – These deductions are under Section 80H to 80RRB provided in respect of profits and gains of specific industries such as hotel business, small scale industrial undertaking, housing projects, export business, infrastructure development etc. However, deduction under Section 80P which provides deduction to co-operative societies is excluded for this purpose; or
- Deduction under Section 35AD – While capital expenditure in assets usually qualify for depreciation year on year, under this Section 100% deduction is allowed on capital expenditure incurred for specified business such as operation of cold chain facility, fertilizer production etc; or
- Profit linked deduction under Section 10AA – Deduction of profit varying from 100% to 50% is provided to units in Special Economic Zones (SEZs).
- Based on the above, it can be concluded that AMT provisions are applicable only to those non-corporate taxpayers having income under the head ‘Profits or Gains of Business or Profession’. Further, as mentioned above AMT provisions are applicable only when normal tax payable is lower than AMT in any FY.
Exemption from Applicability of AMT
AMT provisions are not applicable to an individual, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI) and artificial juridical person whose adjusted total income does not exceed Rs 20,00,000. Therefore, this exemption based on monetary threshold of adjusted total income is not applicable to LLPs, partnership firms and other non-corporate assessees.
Adjusted total income and AMT is arrived in the following manner:
| Particulars | Amount (in Rs) |
| Taxable income (A) | XXXXX |
| Add: Deduction claimed if any under Chapter VI-A from 80H to 80RRB except 80P (B) | XXXXX |
| Deduction claimed if any under Section 10AA (C) | XXXXX |
| Deduction claimed if any under Section 35AD reduced by regular depreciation allowed (D) | XXXXX |
| Adjusted total income (E) = (A)+(B)+(C)+(D) | XXXXX |
| AMT – 18.5% of (E) | XXXXX |
Computation of Tax Liability When AMT Provisions are Applicable
| Particulars | Amount (in Rs) |
| Tax liability computed as per normal provisions of the Income-tax Act – normal tax liability | XXXX |
| AMT computed at 18.5% (plus applicable surcharge and cess) on adjusted total income | XXXX |
| Tax liability of taxpayer | Higher of the above |
Note-
1. FM proposes to reduce the Alternate Minimum Tax (AMT) Rates to 15% from 18.5% for the co-operative societies.
2. AMT Credit is not allowed to be carried forward for only up to 15 FYs succeeding the FY in which such AMT is paid.
3. All taxpayers to whom AMT provisions are applicable is required to obtain a report from Chartered Accountant certifying that adjusted total income and AMT have been computed as per provisions of Income-tax Act, in Form No. 29C and furnish the report on or before the due date for filing the return of income.
