[Section 115JB] : Minimum Alternative Tax (MAT) – Deemed Income relating to Certain Companies

Provisions of Minimum Alternate Tax (MAT) under Section 115JB for payment of Tax on Deemed Income relating to Certain Companies.

1.  [Section 115JB (1)]:  Provisions of MAT for payment of tax by certain companies

Tax payable for any assessment year cannot be less than 15% of book profit:

Where in the case of a company, the income-tax payable on the total income as computed under the Income-tax Act, in respect of previous year relevant to the assessment year is less than 15% of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income (book profit) shall be the amount of the income-tax at the rate of 15%.

Thus in case of a company income-tax payable shall be higher of the following two amounts:

(1)        Tax on total income computed as per the normal provisions of the Act by charging applicable normal rates and special rates if any income included in the total income of the company is taxable at special rates.

(2)        15% of book profit

2. [Section 115JB (7)] : MAT Rate to be 9% instead of 15% in case of a unit located in an International Financial Services Center

Notwithstanding anything contained in section 115JB(1), where the assessee referred to therein, is a unit located in an International Financial Services Center and derives its income solely in convertible foreign exchange, the provisions of section 115JB(1) shall have the effect as if for the words “fifteen per cent” wherever occurring in that sub-section,, the words “nine per cent” had been substituted.

3.  Provisions of section 115JB not to apply in certain cases

The provisions of section 115JB shall not apply in case of the following:

1.  (i) any income accruing or arising to a company from life insurance business referred to in section 115B;

(ii)        a person who has exercised the option referred to under section 115BAA or section 115BAB. [Section 115JB(5A)]

2.  A foreign company, if—

(i)         the assessee is a resident of a country or a specified territory with which India has an agreement referred to in section 90(1) or the Central Government has adopted any agreement under section 90A (1) and

the assessee does not have a permanent establishment in India in accordance with the provisions of such agreement; or

(ii)        the assessee is a resident of a country with which India does not have an agreement of the nature referred to in clause (i) and

the assessee is not required to seek registration under any law for the time being in force relating to companies. [Explanation 4 to section 115JB (2)]