Important Keyword: AMT, Business and Profession Income, Chapter VI-A, Slab Rates.
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AMT – Alternative Minimum Tax under Section 115JC
In the evolving landscape of Indian taxation, Alternative Minimum Tax (AMT) plays a critical role in ensuring that certain taxpayers with substantial income, who benefit from various deductions and exemptions, still contribute a minimum amount of tax to the government. Introduced as a parallel tax computation mechanism, AMT under Section 115JC of the Income Tax Act, 1961, aims to promote equity in tax liability. 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.
What Is AMT?
The concept of AMT is similar to the Minimum Alternate Tax (MAT) applicable to companies. However, AMT is specifically designed for non-corporate taxpayers such as:
- Individuals
- Hindu Undivided Families (HUFs)
- Associations of Persons (AOPs)
- Bodies of Individuals (BOIs)
- Partnerships (other than LLPs exempt under certain conditions)
- Limited Liability Partnerships (LLPs)
It ensures that taxpayers claiming substantial deductions under Chapter VI-A (Part C), Section 10AA (SEZ units), or other profit-linked incentives, do not entirely escape taxation.
Applicability of Alternative Minimum Tax
- Individual, Hindu Undivided Family (HUF), Association of Persons (AOP), or Body of Individuals (BOI) with adjusted total income exceeding INR 20 lakhs.
- Any taxpayer, excluding companies, regardless of total income.
AMT provisions apply to eligible taxpayers under the following conditions:
- Claiming deductions under Sections 80H to 80RRB, excluding Section 80P.
- Claiming deductions under Section 35AD.
- 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:
| 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 |
If the provisions of Alternative Minimum Tax (AMT) apply to a taxpayer, the tax liability would be higher of the following:
- 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.
- 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.
AMT Credit and Set-Off – Section 115JD
One of the key reliefs provided under the AMT regime is the AMT credit mechanism. If a taxpayer pays AMT in any assessment year, the excess amount paid over the normal tax liability can be carried forward for 15 assessment years and set off in future years against normal tax liability (to the extent it exceeds AMT in those years).
AMT Reporting Requirements – Section 115JG
Taxpayers subject to AMT must obtain a report in Form 29C from a Chartered Accountant, certifying the computation of adjusted total income and AMT liability. This report must be filed along with the income tax return.
Key Takeaways
- AMT ensures that high-income individuals and entities claiming substantial tax deductions contribute a minimum tax.
- Applicable to non-corporate taxpayers with adjusted total income exceeding ₹20 lakh who claim specified deductions.
- AMT rate is 18.5%, with the benefit of AMT credit carry-forward for 15 years.
- Mandatory CA certification and compliance requirements apply.
Conclusion
The introduction of AMT under Section 115JC reflects the government’s intent to uphold tax equity and prevent revenue leakage due to aggressive tax planning. Taxpayers availing significant deductions must proactively evaluate their AMT obligations to ensure timely compliance and efficient tax planning.
Frequently Asked Questions
1. Who is required to pay Alternative Minimum Tax (AMT) under Section 115JC?
Answer: AMT applies to non-corporate taxpayers (such as individuals, HUFs, AOPs, BOIs, partnerships, and LLPs) whose adjusted total income exceeds ₹20 lakhs and who claim deductions under Section 10AA, Section 35AD, or Chapter VI-A (Part C, except 80P).
2. What is the AMT rate applicable for FY 2024–25 (AY 2025–26)?
Answer: The AMT rate is 18.5% of the Adjusted Total Income, plus applicable surcharge and cess.
3. How is Adjusted Total Income calculated for AMT purposes?
Answer: Adjusted Total Income =
Taxable Income + Deductions under Sections 80H to 80RRB (excluding 80P) + Deduction under Section 35AD (less depreciation under Section 32) + Deduction under Section 10AA.
4. I claimed a deduction under Section 10AA. Will I be subject to AMT?
Answer: Yes. If your adjusted total income exceeds ₹20 lakhs, and you’ve claimed deduction under Section 10AA, AMT provisions will apply.
5. Can I carry forward and use AMT paid in earlier years?
Answer: Yes. As per Section 115JD, excess AMT paid over normal tax liability can be carried forward for 15 assessment years and set off against future normal tax liability.
6. Is any report required to be filed when AMT is applicable?
Answer: Yes. Taxpayers must obtain Form 29C, a certificate from a Chartered Accountant, certifying the computation of AMT and adjusted total income, and file it with their income tax return.
7. Does AMT apply to all LLPs?
Answer: No. AMT does not apply to LLPs that do not claim deductions under Section 10AA, 35AD, or Chapter VI-A (Part C). Only LLPs claiming such deductions and having adjusted total income above ₹20 lakhs are covered.
8. What happens if my normal tax liability is higher than the AMT amount?
Answer: If the normal tax liability is higher than the tax under AMT, you will pay tax as per normal provisions, and AMT will not apply. AMT only ensures a minimum tax payment when the normal liability is low due to high deductions.
Read More: Depreciation under Income Tax Act
Web Stories: Depreciation under Income Tax Act
Official Income Tax Return filing website: https://incometaxindia.gov.in/
