Understanding Minimum Alternative Tax And Alternative Minimum Tax

MCQ SELF CHALLENGE # 0080

Minimum Alternative Tax And Alternative Minimum Tax

Dear Professional Seniors and friends,

Warm Greeting from top tax consultant in Gurgaon!

Here is the Next post of #MCQ on concept-based practical professional knowledge on MAT & #AMT in a unique manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 80.1: A Company has a Book Profit of Rs 350 Crore from Life Insurance Business and taxes as per normal Income Tax is less than MAT/AMT on Book Profit. What is the Rate of Tax Applicable to the Company?

A. Mat is applicable @ 18.5% since it is a company.

B. AMT is applicable @ 18.5% since it is a company

C. Income Tax @ 10% is applicable and No MAT/AMT applies.

D. AMT is applicable @ 9w since it is a company.

MCQ 80.2: What is the rate of MAT/AMT applicable in case of non-Corporate Assessee being a unit located in International Financial Services Centre (from FY 18-19)

A. Mat is applicable @ 18.5% since it is a noncompany.

B. AMT is applicable @ 18.5 % since it is a noncompany.

C. Income Tax 30% is applicable & No MAT/AMT applies.

D. AMT is applicable @9% since it is a noncompany.

Answer MCQ Self Challenge # 0080

This post of MCQ is on provisions relating application of MAT and AMT

Answer to MCQ 80.1:

C) Income Tax -30% is applicable & No MAT/AMT applies

Answer to MCQ 80.2:

D) AMT is applicable @9% since it is a noncompany.

Practical Analysis for MCQ 80.1 & 80.2:

• Applicability and non-applicability of MAT-As per section 115.8, every taxpayer being a company is liable to pay MAT if the Income-tax (including surcharge and cess) payable on the total income, computed as per the provisions of the income-tax Act in respect of any year is less than MAT which is 18.5% of its Book-profit Plus surcharge, health & education cess)
• From the above it can be observed that the provisions of MAT are applicable to every company whether public or private and whether Indian or foreign
• However, as per section 115JB(SA) MAT shall not apply to any income accruing or arising to a company from the life insurance business referred to in section 1158
• MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an international Financial Services Centre and deriving its income solely in convertible foreign exchange.

Applicability And Non-Applicability Of An AMT

• The provisions of MAT are applicable to a corporate taxpayer only. The provisions relating to AMT are applicable to non-corporate taxpayers in a modified pattern in the form of Alternate Minimum Tax, Le AMT Thus, & can be said that MAT applies to companies and AMT applies to a person other than a company. The provisions relating to AMT are given in sections 115JC to 115JF
• AMT is levied @ 9% in case of a non-corporate assesses being a unit located in the International Financial Services Centre and deriving its income solely in convertible foreign exchange. Surcharge and cess as applicable will also be levied.
• Based on the above analysis, the correct answer is MCQ 801. C) Income Tax @30% +Surcharge cess. No Mat is Applicable as it is a life insurance company.

• Correct answer MCQ 80.2: D) AMT is applicable @9% since it is a noncompany and being a unit of an international Financial Services Centre.

(Disclaimer: The objective of the MCC post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as a professional opinion: you can definitely have your own opinion.)

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321