What is Minimum Alternate Tax (MAT)?

MAT is a provision u/s 115JB of the Income Tax Act, 1961, introduced to ensure that profit-making companies paying zero or minimal tax under normal provisions pay a minimum tax based on their book profits.

What is the current MAT rate?

The current basic MAT rate is **15%** of book profits, plus applicable surcharge and 4% Health and Education Cess.

Do new corporate tax regimes (Section 115BAA/115BAB) attract MAT?

No. Companies that opt for the concessional tax regimes u/s 115BAA (22% base rate) or 115BAB (15% base rate) are exempt from MAT provisions.

MAT Credit is the difference between the MAT paid and the normal income tax payable. It can be carried forward and set off against normal tax liability for up to **15 Assessment Years**.

How do you record MAT Credit in Tally Prime?

Debit the **MAT Credit Entitlement** ledger (classified under Loans & Advances - Asset) and credit the **Provision for Tax** ledger using a journal voucher (F7).

MAT Rate for AY: Computation & Credit Guide

Corporate tax planning in India requires managing two distinct tax computations: normal income tax provisions and **Minimum Alternate Tax (MAT)** under Section 115JB.

If a company's tax liability under normal provisions is lower than 15% of its book profits, the book profit is deemed the taxable income, and the company must pay MAT.

1. Book Profit Adjustments u/s 115JB

To calculate the taxable book profit u/s 115JB, you must adjust the net profit from the profit and loss statement:

Adjustment Type	Specific Additions (Add Back)	Specific Deductions (Deduct)
Tax Provisions	Income tax paid/payable, provisions for deferred tax	Tax refunds credited to P&L
Reserve Transfers	Amounts carried to any reserves	Amounts withdrawn from reserves credited to P&L
Depreciation	Total depreciation debited to P&L	Depreciation excluding revaluation depreciation
Losses	Provisions for losses of subsidiary companies	Lower of brought forward business loss or unabsorbed depreciation

2. Ind AS Transition Adjustments for Book Profits

For companies following Ind AS (Indian Accounting Standards), Section 115JB(2A) prescribes specific adjustments to book profit during the transition year.

Companies must adjust book profit for items like fair valuation of investments through OCI (Other Comprehensive Income), changes in revaluation surplus, and re-measurement gains/losses on defined benefit plans. Transition adjustments are spread over a **5-year period** starting from the transition year.

3. Form 29B and Chartered Accountant Certification

Under Section 115JB, every company paying MAT must obtain a report in **Form 29B** from a practicing Chartered Accountant. The CA certifies that the book profit was computed in accordance with the provisions of Section 115JB, verifying that all additions and deductions match the company's financial records.

Form 29B must be uploaded online to the Income Tax e-filing portal before the due date for filing the income tax return (usually October 31 of the Assessment Year).

4. Case Study: Computation & MAT Credit Entry

Let's calculate the tax liability for a company during the financial year:

Corporate Net Profit (P&L): ₹2,50,00,000
Book Profit Additions: ₹40,00,000 (including tax provisions and deferred tax additions)
Book Profit Deductions: ₹30,00,000 (including depreciation adjustments)
Calculated Book Profit u/s 115JB: ₹2,60,00,000
Book Profit = ₹2,50,00,000 + ₹40,00,000 - ₹30,00,000 = ₹2,60,00,000
MAT Liability (15%): ₹39,00,000 (excluding surcharge/cess)
Normal Tax Liability: ₹35,00,000 (calculated under normal tax provisions)
Tax Liability & MAT Credit: Because the normal tax (₹35,00,000) is lower than the MAT (₹39,00,000), the company pays ₹39,00,000. The difference of **₹4,00,000** is recognized as a MAT Credit Asset, which can be carried forward to set off future normal tax liabilities.

Entry: Recording MAT Credit Entitlement (F7 Journal)
Debit:  MAT Credit Entitlement (Current Assets) ₹4,00,000
Credit: Provision for Income Tax (Liability)              ₹4,00,000

5. Statutory Auditing of MAT Credit Assets

Statutory auditors verify the carrying value of MAT credit assets. Under ICAI guidelines, auditors verify that there is "reasonable certainty" that the company will generate sufficient normal taxable profit in future years to utilize the credit.

If the company has a history of losses, auditors may require writing down the MAT credit asset.

6. Posting Tax Provisions in Tally Prime

To record corporate tax provisions and MAT credit:

Tally Tax Ledger Setup:

Go to **Gateway of Tally > Create > Ledger**. Create **MAT Credit Entitlement** under **Loans & Advances (Asset)**.

Post the monthly or annual provisions using a journal voucher (F7), debiting the asset ledger and crediting the tax provision accounts.

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