Alternate Minimum Tax (AMT) vs Minimum Alternate Tax (MAT): Meaning, Applicability and Key Differences
- Minimum Alternate Tax (MAT) applies to companies covered by section 206(1) and is normally 14% of book profit.
- Alternate Minimum Tax (AMT) applies to non-companies claiming specified deductions and is normally 18.5% of adjusted total income.
- The ₹20 lakh AMT threshold does not apply to Limited Liability Partnerships (LLPs) or partnership firms.
- No new MAT credit arises from 1 April 2026; eligible older credit follows the transitional rules.
- AMT credit can be carried forward for up to 15 tax years.
A business may report a healthy accounting profit but have much lower taxable income after deductions and tax incentives. A non-company may face the opposite problem when deductions reduce total income but must be added back for AMT. Applying the wrong minimum-tax provision can lead to underpaid tax, overstated credit or the wrong accountant’s report being filed.
This guide is for company directors, LLP partners, business owners, finance teams and tax professionals preparing computations for tax year 2026-27. It explains who must check MAT or AMT, how the tax bases differ, how credits work and which compliance report is required. It does not explain the rules for periods before tax year 2026-27, foreign-company MAT in detail or every Indian Accounting Standards (Ind AS) adjustment.
Under the Income-tax Act, 2025, tax year replaces the separate terms “previous year” and “assessment year.” In this guide, tax year 2026-27 runs from 1 April 2026 to 31 March 2027.
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AMT vs MAT at a Glance
| Point | MAT | AMT |
|---|---|---|
| Who must check it? | Companies within section 206(1) | Persons other than companies claiming specified deductions |
| Provision | Section 206(1) | Section 206(2) |
| Calculated on | Book profit | Adjusted total income |
| Rate | 14%; 9% for a qualifying International Financial Services Centre (IFSC) unit | 18.5%; 15% for a co-operative society; 9% for a qualifying IFSC unit |
| ₹20 lakh threshold | None | Available to specified individuals and similar taxpayers, but not LLPs or firms |
| Not calculated on | Adjusted total income | Book profit |
| Credit | MAT credit: no new credit from 1 April 2026; qualifying old credit follows transitional rules | AMT credit: excess AMT over normal income tax, carried forward for up to 15 tax years |
| Accountant’s report | Form No. 66 | Form No. 67 |
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Minimum Alternate Tax for Companies
When MAT Applies
A company must calculate MAT when it remains within the scope of section 206(1). MAT becomes payable when tax under the normal income-tax provisions is lower than tax calculated on book profit.
For tax years beginning on or after 1 April 2026, the ordinary MAT rate is 14%. Add the relevant surcharge and 4% Health and Education Cess after calculating base MAT.
A qualifying company unit in an International Financial Services Centre (IFSC) uses a 9% rate when it derives its income solely in convertible foreign exchange. Receiving only part of the income in foreign currency does not satisfy this condition.
When MAT Does Not Apply
MAT does not apply in the following principal cases:
- A domestic company has exercised the option under section 200 or section 201.
- Income arises from the life insurance business covered by section 194(1), Table Serial No. 6.
- Shipping income is taxed under the tonnage-tax provisions.
- A treaty-country foreign company has no permanent establishment in India.
- A non-treaty foreign company is not required to register under Indian company law.
- A qualifying non-resident company’s total income consists only of income covered by the specified presumptive taxation provisions.
However, exclusion from MAT does not mean exemption from income tax. The company may still have a liability under the normal provisions.
How Book Profit Is Calculated
Book profit starts with the net profit reported in the company’s statement of profit and loss, followed by the additions and reductions required under section 206 . Most companies prepare this statement under Schedule III to the Companies Act, 2013 . Banking, insurance, electricity and certain other regulated companies follow the financial-statement requirements governing their industries. The principal adjustments are:
| Stage | Common Items |
|---|---|
| Starting amount | Net profit shown in the relevant statement of profit and loss |
| Common additions | Income-tax provisions, transfers to reserves, provisions for unascertained liabilities, proposed dividends, depreciation, deferred tax and provisions for diminution in asset value |
| Common reductions | Eligible reserve withdrawals, permitted depreciation adjustment, eligible revaluation-reserve withdrawals, deferred tax credited to profit and loss, and the lower of brought-forward book loss or unabsorbed book depreciation |
| Additional review | Foreign-company income, Indian Accounting Standards (Ind AS) adjustments, insolvency cases and specified business-trust transactions |
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These are not exhaustive adjustments. A common mistake is to apply 14% directly to accounting profit without first making the additions and reductions required under section 206.
The basic formula is:
Book profit × MAT rate = base MAT
The relevant surcharge and 4% Health and Education Cess are then added.
Worked MAT Example
Assume an ordinary-regime domestic company has:
- Book profit of ₹4,00,00,000
- Total income under the normal provisions of ₹1,00,00,000
- A normal tax rate of 25%
| Calculation | Amount |
|---|---|
| Normal income tax at 25% | ₹25,00,000 |
| Surcharge | Nil |
| Cess at 4% | ₹1,00,000 |
| Normal income-tax liability | ₹26,00,000 |
| MAT at 14% of ₹4,00,00,000 | ₹56,00,000 |
| Surcharge at 7% | ₹3,92,000 |
| Cess at 4% | ₹2,39,680 |
| MAT liability | ₹62,31,680 |
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The company pays ₹62,31,680 because this is the higher liability. The excess over normal income tax does not create fresh MAT credit.
The figures are illustrative. Marginal relief, foreign tax credit, special-rate income and other adjustments may alter the final amount.
MAT Credit After 1 April 2026
MAT credit is credit created under section 115JAA of the repealed Income-tax Act, 1961 when MAT exceeded normal income tax. MAT paid for tax year 2026-27 or a later year does not create new MAT credit. Only eligible credit remaining on 31 March 2026 can be used under the transitional rules.
| Company Position | Treatment of Old MAT Credit |
|---|---|
| Domestic company remaining in the ordinary regime | Credit cannot be used while the company remains in that regime |
| Domestic company exercising the section 200 or 201 option | Annual set-off is limited to 25% of tax payable |
| Foreign company | Set-off is limited to the amount by which normal income tax exceeds MAT |
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Any unused credit expires at the end of its original 15-tax-year carry-forward period.
For example, a domestic company has ₹8,00,000 of eligible credit and exercises the section 200 option. If its tax payable is ₹20,00,000, the 25% cap limits the set-off to ₹5,00,000. The remaining ₹3,00,000 may be carried forward until its original expiry date.
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Alternate Minimum Tax for Non-Companies
When AMT Applies
A person other than a company must examine AMT when claiming either:
- A deduction under Chapter VIII-C, other than section 149
- A deduction under section 46
Merely being an LLP, partnership firm or high-income individual does not trigger AMT. The taxpayer must first claim a specified deduction, and AMT must exceed normal income tax.
For individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs) and artificial juridical persons, AMT does not apply when adjusted total income is ₹20 lakh or less. This threshold is not available to LLPs, partnership firms or local authorities.
AMT also does not apply to a person taxed under section 202, a co-operative society using the section 203 option, a new manufacturing co-operative society using the section 204 option, or a specified fund covered by Schedule VI.
The ordinary AMT rate is 18.5%. A co-operative society uses a 15% rate. A qualifying IFSC unit deriving its income solely in convertible foreign exchange uses a 9% rate.
How Adjusted Total Income Is Calculated
Adjusted total income is total income increased by the specified deductions shown below:
| Calculation | Treatment |
|---|---|
| Total income | Starting amount |
| Chapter VIII-C deductions, other than section 149 | Add back |
| Section 46 deduction | Add back after reducing the depreciation that would have been available under section 33 |
| Adjusted total income | Result after the additions |
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Worked AMT and Credit Example
Assume an LLP has:
- Total income after the specified deduction of ₹45,00,000
- Chapter VIII-C deduction of ₹45,00,000
- Adjusted total income of ₹90,00,000
| Calculation | Amount |
|---|---|
| Normal income tax at 30% | ₹13,50,000 |
| AMT at 18.5% of ₹90,00,000 | ₹16,65,000 |
| Base AMT credit | ₹3,15,000 |
| Surcharge | Nil |
| Cess at 4% on AMT | ₹66,600 |
| AMT liability | ₹17,31,600 |
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The LLP pays ₹17,31,600. AMT credit is the amount by which AMT exceeds normal income tax. In this example, the base AMT credit is ₹3,15,000.
Suppose that, in a later year, normal income tax is ₹20,00,000 and AMT is ₹18,00,000. The taxpayer may set off only ₹2,00,000, which is the difference between those liabilities. The remaining ₹1,15,000 can continue to be carried forward within the 15-tax-year limit. No interest is payable on AMT credit.
Compliance Forms and Working Papers
Rules 137 and 138 of the Income-tax Rules, 2026 prescribe the following reports:
| Liability | Accountant’s Report | Purpose |
|---|---|---|
| MAT | Form No. 66 | Certifies the book-profit computation |
| AMT | Form No. 67 | Certifies adjusted total income and AMT |
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Both reports are generally due one month before the income-tax return deadline. Form No. 66 may instead be filed with a return submitted in response to a notice.
Keep one working file containing the normal income-tax calculation, statement of profit and loss, fixed-asset and depreciation records, MAT or AMT adjustments, available tax credits, and Form No. 66 or Form No. 67. Keeping these records together makes the calculation easier to review and reduces the risk of inconsistent figures.
BUSY accounting software helps keep ledger balances, depreciation details and financial statements organised, making it easier to verify the figures used in MAT or AMT calculations and identify mismatches before filing.
Conclusion
Minimum-tax errors often begin when the taxpayer’s legal form, tax regime and deductions do not match the accounting records. Before filing, confirm the relevant exclusions and ensure that the accounting records support every adjustment. Companies subject to MAT compare normal income tax with MAT, normally at 14% of book profit. Non-companies subject to AMT compare normal income tax with AMT, normally at 18.5% of adjusted total income. In both cases, the higher liability is payable.
