Understanding Minimum Alternate Tax (MAT) in India: A Comprehensive Overview
Purpose of MAT:
Targets profitable companies minimizing taxes via deductions.
Aims to ensure fair tax contributions despite exemptions.
MAT Calculation:
Higher of tax under regular provisions or MAT provisions.
MAT rate reduced to 15% from AY 2020-21.
Components of MAT Calculation:
Adjustments to net profit: additions and deletions.
Ensures accurate reflection of taxable income.
Applicability of MAT:
Applies if tax payable < 15% of book profit.
Exemptions for specific domestic and foreign entities.
MAT Credit:
Offset against regular tax liability.
No interest paid on MAT credit.
Importance of MAT:
Prevents tax avoidance strategies.
Promotes equity and fairness in taxation.
Conclusion:
MAT serves as a vital tool to ensure profitable companies contribute their fair share of taxes, enhancing transparency and equity in the taxation system.