Sec 115jb of the income tax act, 1961 read with first proviso to section 1038 of the act. Faq on mat computation for ind as compliant companies. Provision of mat minimum alternate tax for payment of. Cbdt issues faqs on computation of book profit for levy of. Cbdt notifies rules for computation of interest income. In other words, the mat provisions in section 115jb create a deeming fiction, which deems book profit as the total income of a company for determining its tax liability. Mat provisions require book profit off to the lower number. Aggregate of profitslosses of both stp and nonstp units, and not just nonstp units, is to be taken into consideration while computing book profit us. The revised section 115jb of the income tax act, 1961 the act prescribes that. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016.
Capital gains exempt under section 54ec need not be. Central board of direct taxes cbdt constituted mat ind as committee to suggest framework for computation of book profit for purposes of levy of minimum alternate tax mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter the following are brief extracts based on the. Mat book profit computation 115jb for ind as compliant. It is calculated under section 115jb of the income tax act. Central government notified the indian accounting standards ind. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. While computing the book profits under the provisions of section 115jb of the income tax act, 1961 the act, disallowance under section 14a of the act has been a topic of debate since its inception with reference to increasing the book profit by such disallowance. Computation of book profit under sec 115jb income tax forum. Additions to the net profit if debited to the profit and loss account. Cbdt clarifies on computation of book profit for the purposes. Understanding the concept of liability to pay minimum alternate tax mat and alternate minimum tax amt and various provisions like book profit, dividends paid or proposed, depreciation, deferred tax, income of foreign company, etc. Mat is calculated as 15% of the book profit of the tax assesse. Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Cbdt amends the report on computation of book profits for.
Income tax 932020 mat computation of book profit us 115jb doubtful debts since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the book profits under section 115jb are not required to be reduced. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q. Calculation of book profits for the purpose of mat section. In a recent ruling1 of the ahmedabad bench of the income tax appellate tribunal tribunal, an issue relating to determining the quantum of brought forward unabsorbed loss and unabsorbed depreciation eligible for reduction from the profits in the tax computation under section 115jb of the income tax act, 1961 the act has come up. Insertion of new section 115jb income tax department.
Calculation of mat credit applicability of minimum. For calculating the tax outflow of company, first the tax is required to be calculated as per the normal provisions under the income tax act. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act for indian accounting standards ind as compliant companies cbdt circular no. Calculation of book profits for the purpose of mat.
The finance act, 2017 notified on 31 march 2017, has introduced a separate formula for computation of book profit for the entities that prepare financial statements under indian accounting standards ind as. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. Cbdt notifies revised form 29b of income tax act mat. Minimum alternate tax mat section 115jb provision of mat minimum alternate tax for payment of tax by certain companies section 115jb book profit how to determine section 115jb analysing computation of total income and book profit. As the book profit based on ind as compliant financial statement is likely to be different from the book profit based on existing indian gaap, the cbdt constituted a committee in june, 2015 for suggesting the framework for computation of mat liability under section 115jb for ind as compliant companies in the year of adoption and thereafter. The provisions of subsection 5 of section 115jb open the assessment to the application of all other provisions contained in the income tax act except if specifically barred by that section itself. Book profit under section 115jb the purpose of computing. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner.
Book profit us 115jb to be reduced by exempted capital gain. Under existing rules, book profit is calculated as per section 115jb of the income tax act, 1961. Minimum alternate tax mat whereby a companys tax liability as per regular provisions is to be tested against a specified percentage of its book profits. Government of india ministry of finance department of revenue central board of direct taxes. Section 115jb provides for a list of items to be added reduced while arriving at the book profits, but deduction under section 80ib10 was not listed therein. Itd disallowedstatutory dues in the form of taxes in 39 assessment cases during computation of income under normal provisions but were not considered under mat. Clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies.
May 07, 2016 central board of direct taxes cbdt constituted mat ind as committee to suggest framework for computation of book profit for purposes of levy of minimum alternate tax mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter. Cbdt circular of clarifications faqs on computation of s. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies. Apr 21, 2016 this section provides that in case the tax payable by a company is less than 18.
Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Dear friends, under section 115jb of it act 1961, in order to compute book profit, the following is to be reduced from profit loss as per companies act 20. Faqs on minimum alternate tax mat relating to ind as. On 1 february 2017, the finance minister presented the finance bill, 2017. Minimum alternate tax as per section 115jb of income tax act as the name itself suggests that if for a company in the previous year the tax payable to the government falls below a certain limit, the company needs to pay tax on the basis of minimum alternate basis i.
Home publications clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act for. Mat provisions us 115jb an exhaustive overview of landmark. Central government notified the indian accounting standards ind as which are converged with. Computation of book profit us 115jb tax management india. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. The procedure for the computation of book profit as per.
Mat computation surplus on sale of shares received as gift to the book profit for taxation under section 115jb held that as decided in own case 2016 4 tmi 348 itat ahmedabad ld. Capital gains exempt under section 54ec need not be reckoned. Cbdt report regarding framework for computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the lncome tax act 1961 for indian accounting standards lnd as compliant companies in the year of adoption and thereafter. Report under section 115jb of the income tax act, 1961 for computing the book profits of the company 1. The matter was considered by the board and the following clarifications are issued. Additionally, to have parity between the transition adjustment and ongoing adjustments on account of items adjusted to other equity, the committee has recommended amendment to section 115jb 2a of the income tax act the act w. Iwe have examined the accounts and records of name and address of the assessee with pan engaged in business of nature of business in order to arrive at the book profit during the year. The updated form 29b for mat audit reporting was notified, with immediate effect, under section 115jb on computation of book profits of a company of the income tax act.
Amount to be added back if dedibted to profit and loss account. Jul 26, 2017 framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. Jul 06, 2017 if the assessee has not debited any actual expenditure relating to the earning of the exempt income, therefore, the provisions of section 14a cannot be imported into the computation of book profit under section 115jb of the income tax act, 1961. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. This section provides that in case the tax payable by a company is less than 18.
Income tax computed as per provision of section 115jb of income tax act. Jul 29, 2016 the income tax act contains a special mechanism i. Mat computation of book profit us 115jb doubtful debts since, we. The minimum alternative tax mat is a provision introduced in direct tax laws to limit the tax deductionsexemptions otherwise available to taxpayers so that they pay a minimum amount of tax to the government. Pwc reportinginbrief clarifications on mat for ind as. Faqmat book profit computation for ind as compliant companies. Cbdt circular on section 115jb of the incometax act, 1961. Minimum alternate tax part iv computation of book profits. The taxable income of abc company, not availing any tax exemptionsincentives, as per the provisions of the income tax act, 1961 is rs.
Taxpayers methodology to set off and carry forward. Cbdt amends the report on computation of book profits for ind. Guide to minimum alternate tax mat for ind as compliant. Income tax paid or payable and the provisions income tax, interest under the income tax act, dividend therefor. The committee submitted two interim reports in year 2016 which were placed before stakeholders for. Nov 20, 2012 while computation of book profit for mat calculation under sec 115jb do we have to include the income exempted under sec 10aa among the deductions from net profit as per schedule vi income tax tax queries. Deduction under section 80ib10 not permissible while.
Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. First of all calculate tax as per normal provisions of income tax. Apr 20, 2019 taxable income as per normal provision of income tax act. Computation of book profits would be calculated as under a stepi. Government of india ministry of finance central board of. The minimum alternate tax mat on companies challenges and. No 3232015tpl issued a faq titled clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies where it. The minimum alternate tax mat on companies challenges and way forward 09. Conundrum on brought forward loss treatment under mat. No marginal relief, since the income does not exceed. Cbdt clarifies on computation of book profit for the. Whether the profit arising on transfer of development rights to the fully owned subsidiary company is required to be included in the book profit under section 115jb of the income tax act, 1961 the act. Jul 26, 2017 consequently, the finance act, 2017, has amended the provisions of section 115jb of the incometax act, 1961 the act w. The levy of tax is on the book profits after effecting various upward and downward adjustments as set out in terms of the explanation thereto.