Important Keyword: AMT, Business and Profession Income, Chapter VI-A, Slab Rates.

AMT – Alternative Minimum Tax under Section 115JC

The Income Tax Department introduced the Alternate Minimum Tax (AMT) as a measure to ensure that taxpayers, excluding companies, contribute a minimum amount of tax, particularly those who exploited incentives and deductions excessively, resulting in zero tax liability. To curb misuse and promote fair taxation, the government implemented Minimum Alternate Tax (MAT) for companies and AMT for other taxpayers.

AMT aims to collect a minimum level of tax from eligible taxpayers, with provisions allowing for the carry-forward of AMT credits to offset future tax liabilities.

Applicability of Alternative Minimum Tax:

1. Individual, Hindu Undivided Family (HUF), Association of Persons (AOP), or Body of Individuals (BOI) with adjusted total income exceeding INR 20 lakhs.
2. Any taxpayer, excluding companies, regardless of total income.

AMT provisions apply to eligible taxpayers under the following conditions:

1. Claiming deductions under Sections 80H to 80RRB, excluding Section 80P.
2. Claiming deductions under Section 35AD.
3. Claiming deductions under Section 10AA.

AMT Rate & Adjusted Total Income

Rate of Alternative Minimum Tax is 18.5% of the Adjusted Total income. In addition to this, surcharge and cess are applicable. Calculate the adjusted total income in the following manner:

If the provisions of Alternative Minimum Tax (AMT) apply to a taxpayer, the tax liability would be higher of the following:

1. Tax Liability as per the normal provisions of the Income Tax Act:

Calculate the Total Income of the taxpayer from all sources of income. After claiming deductions under Chapter VI-A, compute the Tax Liability on the Total Income as per the applicable slab rates.

2. Tax Liability under AMT:

Calculate the Adjusted Total Income by adding back the deductions claimed under specified sections. Apply the AMT rate of 18.5% to the Adjusted Total Income. Additionally, surcharge and cess, if applicable, are added to the AMT amount for final computation. Compare the tax liability calculated under both methods, and the higher amount will be the taxpayer’s tax liability for that financial year.

This ensures that if the tax liability computed under the normal provisions of the Income Tax Act is lower than the tax liability under AMT, the taxpayer will be required to pay tax as per the AMT provisions, ensuring a minimum level of tax payment.

1. Scenario Analysis:
   • Samir’s Taxable Income and AMT applicability.
   • Aryan Enterprises’ AMT Credit and utilization.
2. Samir’s Case:
   • Taxable Income: INR 18,00,000.
   • Deduction under Section 80QQB: INR 3,00,000.
   • Adjusted Total Income: INR 21,00,000.
   • AMT Applicability: Adjusted Total Income > INR 20 lacs.
3. Tax Liability Calculation:
   • Normal Provisions: INR 3,66,600.
   • AMT Provisions: INR 4,04,040.
   • Final Tax Liability: Higher of the two: INR 4,04,040.
4. AMT Credit Utilization:
   • Aryan Enterprises’ FY 2019-20: Normal Tax – INR 15,00,000, AMT – INR 18,00,000.
   • Carry Forward AMT Credit: INR 3,00,000.
   • FY 2020-21: Normal Tax – INR 10,00,000, AMT – INR 9,00,000.
   • Utilized AMT Credit: INR 1,00,000, Remaining: INR 2,00,000.
5. CA Report:
   • Obtain Form 29C from a Chartered Accountant.
   • Certification of Adjusted Total Income and AMT compliance.
6. Conclusion:
   • Understanding AMT implications and procedures.
   • Ensuring compliance for accurate tax assessment.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/