Background of section 115JC
- The Income Tax Department had introduced the provision of AMT i.e. Alternate Minimum Tax for taxpayers other than Company.
- The government had introduced incentives and deductions to specified industries to encourage investment and growth.
- IT department introduced MAT (Minimum Alternate Tax) for Companies and AMT (Alternative Minimum Tax) for taxpayers other than Company. As part of AMT, the government ensured collecting minimum tax from such taxpayers. Further, it also gave an option to carry forward the AMT Credit and adjust it in future years.
Applicability of Alternative Minimum Tax
The provisions of Alternative Minimum Tax are applicable to the following category of taxpayers:
- Individual, HUF, AOP (Association of Persons) or BOI (Body of Individuals) if the adjusted total income exceeds INR 20 lacs
- Any other taxpayer (other than Company) irrespective of the total income.
Conditions for Alternative Minimum Tax
The AMT provisions are applicable to the above category of taxpayers only if:
- Taxpayer claims a deduction under Section 80H to Section 80RRB (except Section 80P)
- Taxpayer claims a deduction under Section 35AD.
- The taxpayer claims a deduction under Section 10AA.
Tax rate and Adjusted Total Income
- Rate of Alternative Minimum Tax is 18.5% of the Adjusted Total income.
- Calculate the adjusted total income in the following manner
| Particulars | Amount (INR) | |
| Taxable Income | XXXX | |
| Add | Deduction claimed u/s 80H to 80RRB (except 80P) | XXXX |
| Add | Deduction claimed u/s 35AD reduced by regular depreciation allowed as per Section 32 | XXXX |
| Add | Deduction claimed u/s 10AA | XXXX |
| Adjusted Total Income | XXXX | |
| AMT – 18.5% of Adjusted Total Income | XXXX |
Steps for Tax Liability if Alternative Minimum Tax is applicable
If the provisions of Alternative Minimum Tax are applicable, Tax Liability would be higher of the following:
- Tax Liability as per normal provisions of the Income Tax Act. Calculate Total Income of the taxpayer from all sources of income and after claiming Chapter VI-A deductions. Calculate Tax Liability on the Total Income as per the applicable slab rates.
- Tax Liability as per Alternative Minimum Tax Rate. Calculate Tax Liability on the Adjusted Total Income at the rate of 18.5%. on Adjusted Total Income of taxpayer.
Example-1
SIRIS is a Partnership Firm is situated at Special Economic Zone (SEZ). The taxable income of SIRIS for the financial year 2021-22 is Rs: 18,50,000 after deduction of u/s 10AA Rs: 2,50,000. Is is covered under AMT u/s 115JC?
Ans:
Computation of Adjusted Total Income for the Assessment Year 2022-23:
| Particulars | Amount |
| Taxable Income | 18,50,000 |
| Add: Deduction Under Section 10AA | 2,50,000 |
| Adjusted Total Income | 21,00,000 |
Adjusted Total Income exceeds INR 20 lacs. Therefore, the provisions of Alternative Minimum Tax are applicable @ 18.5% So, tax liability is calculate as per following steps
A) As per normal provision of income tax :
| Particulars | Amount |
| Taxable income | 18,50,000 |
| Basic Tax | 3,67,500 |
| Add: Education Cess@4% | 14,700 |
| Total tax | 3,82,200 |
B) Tax as per Alternative Minimum Tax Rate:
| Particulars | Amount |
| Tax on Adjusted Total Income@18.5% | 3,88,500 |
| ADD: Education Cess @4% | 15,540 |
| Total tax | 4,04,040 |
In the above tax liability is higher in the AMT provision so. Tax liability is 4,04,040.
Tax as per AMT – Tax as per Slab rates = 4,04,040 – 3,82,200 = 21,840. The AMC Credit can be carried forward for 15 years.
AMT Credit
- When the tax liability for a financial year is paid as per Alternative Minimum Tax, the taxpayer can claim the credit of excess tax paid in the future financial years as per Section 115JD of the Income Tax Act.
- The AMT Credit can be carried forward for a period of 15 financial years. If the taxpayer is unable to utilise the AMT Credit in 15 years, this credit will lapse. No interest is paid on such credit.
