Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Alternate Minimum Tax (AMT) on all Persons other than Companies [Section 115JC to 115JF Chapter XII-BA]

AMT. which was hitherto applicable to LLP only. has been made applicable to all assessees other than a company.

(1)          ‘Alternate Minimum Tax (AMT)” means the amount of tax computed on adjusted total income,—

(i)            in case of an assessee being a unit referred to in sub-section (4) of section 115JC, at a rate of 9% .;

(ii)           in any other case, at a rate of 18.5% . [Section 115JF(b)]

(2)          “Regular Income-Tax” shall be the income-tax payable for a previous year by a person other than a company on his total income in accordance with the provisions of the Act other than the provisions of Chapter XII-BA. [Section 115JF(d)]

Alternate Minimum Tax (AMT) on all Persons other than Companies [Section 115JC to 115JF Chapter XII-BA]
Alternate Minimum Tax (AMT) on all Persons other than Companies [Section 115JC to 115JF Chapter XII-BA]

1.   All Persons other than a Company required to pay Alternate Minimum Tax (AMT) [Section 115JC(1)]:

Where the regular income-lax payable for a previous year by a person (other than a company) is less than the alternate minimum lax payable for such previous year, the Adjusted Total Income shall be deemed to be the total income of such person and he shall be liable to pay income-tax on such total income at the rate of 18.5%. [Section 115JC(I)]

However, in case of a unit located in an International Financial Service Center and which derives the income solely in convertible foreign exchange, the alternate minimum tax under section 115JC shall be charged @ 9% instead of 18.5%. [Section 115JC(4)]

2.   Meaning of ‘Adjusted Total Income’ [Section 115JC(2)]:

“Adjusted total income” shall be the total income before giving effect to provisions of this Chapter i.e. Chapter XII-BA as increased by the deductions, if any, claimed—

(a)          Under Sections 80-IA to 80RRB other than Section 80P included in Chapter VI-A.

(b)          Under Section 10AA, and

(c)           Under Section 35AD as reduced by the amount of depreciation allowable in accordance with the provisions of Section 32 as if no deduction under section 35AD was allowed in respect of the assets on which the deduction under that section is claimed.

See also  [Section 206CB]- Processing of Statement of TCS

3.   Report from an Chartered Accountant [Section 115JC(3)]:

Every person to whom this section applies shall obtain a report, in Form No. 29C, from an Chartered accountant, certifying that the adjusted total income and the alternate minimum tax have been computed in accordance with the provisions of this Chapter and furnish such report on or before the due date of furnishing of return of income under section 139(1).

The report of a chartered accountant in Form No. 29C is to be furnished at least one month prior to the due date for furnishing the return of income under section 139(1) i.e. by 31st October of the assessment year .

The provisions of this Section 115JC shall not apply to a person who has exercised the option referred to in section 115BAC.

4.   To whom AMT shall be applicable [Section 115JEE(1)] :

The provisions of AMT shall apply to a person who has claimed any deduction under:

(a)          Sections 80-IA to 80RRB other than section 80P:

(b)          Section 10AA: or

(c)           Section 35AD.

(5) To whom AMT shall Not be Applicable [Section 115JEE (2)]:

The provisions of AMT under Chapter XII-BA shall not apply to—

(a)          An Individual or

(b)          A Hindu Undivided Family (HUF) or

(c)           An Association Of Persons (AOP) or a Body Of Individuals (BOI) (whether incorporated or not) or

(d)          An Artificial Juridical Person referred to in section 2(31)(vii), if the adjusted total income of such person does not exceed Rs. 20,00,000.

6.   Tax Credit for Alternate Minimum Tax (AMT) [Section 115JD]

The credit for tax (tax credit) paid by a person on account of AMT under Chapter XII-BA shall be allowed to the extent of the excess of the AMT paid over the regular income-lax parable of that year.

Provided that where the amount of tax credit in respect of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, allowed against the alternate minimum tax payable exceeds the amount of the tax credit admissible against the regular income-tax payable by the assessee, then, while computing the amount of credit under this sub-section, such excess amount shall be ignored.

See also  [Section 143(3)]- Regular / Scrutiny Assessment— On the basis of Return of Income and after Hearing Additional Evidence

This tax credit shall be allowed to be carried forward up to the 10th. assessment year immediately succeeding the assessment year for which such credit becomes allowable. It shall be allowed to be set off for an assessment year in which the regular income-tax exceeds the AMT to the extent of the excess of this regular income-lax over the AMT.

No interest shall be payable on tax credit allowed under section 115JD.

The provisions of section 115JD shall not apply to a person who has exercised the option referred to in Section 115BAC.

7.   Benefit of Tax Credit will be available even if section 115JEE (1) & (2) Not Applicable [Section 115JEE (3)]

With a view to enable an assessec who has paid alternate minimum tax in any earlier previous year to claim credit of the same, in any subsequent year. the Act has inserted section 115JEE (3) so as to provide as under:
Notwithstanding anything contained in Section 115JEE (1) or Section 115JEE (2), the credit for tax paid under section 115JC shall be allowed in accordance with the provisions of section 115JD.

Example:

The Gross total income of R for the previous year 2019-20 is ₹24,50,000 which  includes 1,20,000 as long-term capital gain and ₹3,50,000 as royalty from a book of scientific nature which  is eligible for deduction under section 80QQB. He has deposited ₹90,000 in public provident fund and paid  ₹28,000 by cheque to General insurance company. Compute the tax payable by R for the assessment year  2020-21.

Solution: 

Computation of Total income and Tax payable by as per normal provisions of the Act

Particulars Amount (₹) Amount (₹)
Gross total income : 24,50,000
Less: Deduction under Chapter VIA
U/s 80C 90,000
U/s 80D — ₹28,000 but limited to ₹25,000 25,000
U/s 80QQB — 100% of royalty subject to maximum of ₹3,00,000 4,15,000
Total Income : 20,35,000
Tax on ₹20,35,000 :
Long-term capital gain ₹1,20,000 @ 20% 24,000
Balance total income ₹19,15,000 (20,35,000 – 1,20,000) 3,87,000
Tax exclusive of Cess 4,11,000
Add: Health and education cess @ 4% 16,440
Tax 4,27,440 

Computation of Alternate Minimum Tax 

Step 1:             Compute adjusted total income

Total income 20,35,000
Add: Deduction u/s 80QQB 3,00,000
Adjusted total income 23,35,000 
Adjusted Total income Alternate Minimum Tax 18.5% of 23,35,000 = 4,31,975
See also  Assessment of Limited Liability Partnership (LLP)

₹4,31,975 exceeds the tax (exclusive of cess) on total income as per normal provisions i.e. ₹4,11,000.  Therefore total income will be deemed to be ₹23,35,000 and tax payable on ₹23,35,000 shall be as under:

₹23,35,000 @ 18.5% 4,31,975
Add: Health and education cess @ 4% 17,279
Total tax 4,49,254
Tax payable (rounded off) 4,49,250

 

AMT credit to be carried forward  :

₹4,49,250 – 4,27,440 = ₹21,810

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