Basic of Alternative Minimum Tax Section 115JC of the Income-tax Act 1961

Basic Provisions Relating to Applicability of the Alternative Minimum Tax to Different Taxpayers

As per section 115JC of Income Tax Act, 1961, AMT is Alternate Minimum Tax computed on the adjusted total income of a non-corporate assessee.

The provisions of AMT will apply to every non-corporate taxpayer who has claimed (i) deduction under section 80H to 80RRB (except 80P), (ii) deduction under section 35AD and (iii) deduction under section 10AA. Thus, the provisions of AMT are not applicable to a non-corporate taxpayer who has not claimed any deduction under above discussed sections. However, following points should be kept in mind in this regard.

The provisions of AMT shall apply to an individual or a Hindu undivided family or anassociation of persons or a body of individuals (whether incorporated or not) or an artificial juridical person only if the adjusted total income (discussed later) of such person exceeds Rs. 20,00,000.(Section 115JEE)

The provisions of AMT shall apply to every other person (i.e., other than an individual or a HUF or an AOP/BOI or an artificial juridical person) irrespective of its income. For definition of a person refer to section 2(31) of the Income-tax Act 1961.

Further the provisions of AMT are not applicable to a person who has exercised the concessional tax regime available under section 115BAC or section 115BAD of the Income-tax Act 1961.

Rate of Alternative Minimum Tax (AMT)

In case of non-corporate taxpayer, AMT is levied @ 18.5% of adjusted total income (discussed later). Surcharge and cess as applicable will also be levied. However, AMT is levied @ 9% in case of a non-corporate assessee being a unit located in International Financial Services Centre and deriving its income solely in convertible foreign exchange. Surcharge and cess as applicable will also be levied.

Meaning of Adjusted Total Income

In case of a non-corporate taxpayer, adjusted total income is computed in following manner :

Particulars                                                                                                                       (INR)

Taxable income of the taxpayer                                                                                         XXXX

Add: Amount of deduction claimed under section 80H to 80RRB (except 80P)                      XXXX

Add: Amount of deduction claimed under section 35AD (as reduced by the

amount of depreciation allowable in accordance with the provisions of section 32)             XXXX

Add: Amount of deduction claimed under section 10AA                                                      XXXX

Adjusted total income                                                                                                     XXXX

Tax Liability In case of A Non-Corporate Taxpayers to Whom the Provisions of Amount Apply

As per the concept of AMT, the tax liability of a non-corporate taxpayer to whom the provisions of AMT applies will be higher of the following:

Tax liability computed as per the normal provisions of the Income-tax Law, i.e., tax computed on the taxable income of the taxpayer at the tax rate applicable to him. Tax computed in above manner can be termed as normal tax liability.

Tax computed @ 18.5% (plus surcharge and cess as applicable) on adjusted total income. The tax computed by applying 18.5% (plus surcharge and cess as applicable) on adjusted total income is called AMT.

Note: AMT is levied @ 9% in case of a non-corporate assessee being a unit located in International Financial Services Centre and deriving its income solely in convertible foreign exchange. Surcharge and cess as applicable will also be levied. (Applicable from Assessment Year 2019-20)

AMT Credit

As discussed in earlier part, a non-corporate taxpayer to whome the provisions of AMT applies has to pay higher of normal tax liability or liability as per the provisions of AMT. If in any year the taxpayer pays liability as per AMT, then he is entitled to claim credit in the subsequent year(s) of AMT paid above the normal tax liability.

Provided that where the amount of Foreign Tax Credit (‘FTC’) allowed against the AMT exceeds the amount of such FTC admissible against the tax payable by the assessee under normal provisions of the Income-Tax Act, then, while computing the amount of FTC under this subsection, such excess amount shall be ignored.

Period for which Amount Credit can be Carried Forward

As discussed earlier, a non-corporate taxpayer (to whom the provisions of AMT applies) can carry forward the AMT credit for adjustment in subsequent year(s), however, the AMT credit can be carried forward only for a period of 15 years after which it will lapse. In other words, if AMT credit cannot be utilised by the non-corporate taxpayer within a period of 15 years (immediately succeeding the assessment year in which such credit was generated), then such credit will lapse. No interest is paid to the taxpayer in respect of such credit.

Report From Chartered Accountant

Every non-corporate taxpayer to whom the provisions of AMT apply is required to obtain a report from a chartered accountant in Form No. 29C before the date referred to in Section 44AB of the Income-tax Act 1961.