What is Minimum Alternate Tax (MAT)?
- From 1 April 2026, Minimum Alternate Tax is governed by section 206 of the Income-tax Act, 2025.
- The general MAT rate is 14% of book profit, plus applicable surcharge and cess.
- The rate is 9% for an eligible International Financial Services Centre unit that earns income solely in convertible foreign exchange.
- MAT paid under the new regime does not create fresh MAT credit.
- Income earned up to 31 March 2026 remains covered by the old 15% MAT rules under section 115JB.
Accounting profit is the profit reported in a company's accounts, while taxable income is calculated under income tax rules. A company can therefore report a strong profit while its tax under the regular rules (normal tax) remains low.
This guide explains MAT rates, applicability, book-profit adjustments, old MAT credit and filing rules. It does not cover specialised adjustments involving Indian Accounting Standards, transfer pricing, insolvency or foreign tax credit.
Prepare Reliable Book Figures for MAT Review with BUSY
Use financial statements, detailed ledgers, and depreciation records to assemble the accounting figures needed before statutory MAT adjustments are calculated.
What Is Minimum Alternate Tax?
Minimum Alternate Tax (MAT) is an alternative corporate-tax calculation based on based on book profit. A company compares its normal income tax liability with its MAT and pays the higher of the two.
Under section 206 of the Income-tax Act, 2025, the general MAT rate is 14% of book profit. An eligible International Financial Services Centre (IFSC) unit that derives its income solely in convertible foreign exchange is taxed at 9%.
Law and Rate by Income Period
| Income Period | Applicable Law | General MAT Rate | Accountant’s Report |
|---|---|---|---|
| Up to 31 March 2026 | Section 115JB of the Income-tax Act, 1961 | 15% | Form 29B |
| From 1 April 2026 | Section 206 of the Income-tax Act, 2025 | 14% | Form 66 |
Income Period
Applicable Law
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The return for Financial Year (FY) 2025-26, corresponding to Assessment Year (AY) 2026-27, follows the old section 115JB rules. Income earned from 1 April 2026 follows section 206.
MAT is not charged on turnover or sales. It is calculated on book profit after making the adjustments prescribed by law.
Which Companies Pay MAT?
A company must calculate MAT when section 206 applies to it. MAT becomes payable only when the normal income-tax liability is lower than the MAT liability. The rules vary by company and income type:
| Company or Income Type | MAT Treatment |
|---|---|
| Domestic company under the regular tax regime | MAT comparison applies |
| Domestic company that has opted for the regime under section 200(5) or 201(2) | MAT does not apply |
| Income from the specified life-insurance business | Excluded from MAT |
| Foreign company from a treaty country with no permanent establishment in India (taxable business presence in India) | MAT does not apply |
| Foreign company from a non-treaty country that is not required to register under Indian company law | MAT does not apply |
| Foreign company earning only specified presumptive business income under section 61(2) and offering it to tax at the prescribed rate | MAT does not apply |
| Eligible IFSC unit earning income solely in convertible foreign exchange | MAT applies at 9% |
Company or Income Type
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The exclusions depend on statutory conditions. A company should document why an exclusion applies, rather than treating the company type alone as sufficient evidence.
How Is Book Profit Calculated?
Book profit starts with the net profit shown in the company’s statement of profit and loss. The company then makes the additions and reductions listed in section 206.
Book profit = Net profit in the statement of profit and loss + prescribed additions − permitted reductions
Main Book Profit Adjustments
A reserve is an amount kept aside from profits. A provision is an amount recorded for an expected liability or expense.
| Company or Income Type | MAT Treatment |
|---|---|
| Domestic company under the regular tax regime | MAT comparison applies |
| Domestic company that has opted for the regime under section 200(5) or 201(2) | MAT does not apply |
| Income from the specified life-insurance business | Excluded from MAT |
| Foreign company from a treaty country with no permanent establishment in India (taxable business presence in India) | MAT does not apply |
| Foreign company from a non-treaty country that is not required to register under Indian company law | MAT does not apply |
| Foreign company earning only specified presumptive business income under section 61(2) and offering it to tax at the prescribed rate | MAT does not apply |
| Eligible IFSC unit earning income solely in convertible foreign exchange | MAT applies at 9% |
Company or Income Type
MAT Treatment
Company or Income Type
MAT Treatment
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MAT Treatment
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Deferred tax arises when a ccounting and income-tax rules recognise income or expenses in different periods.
These adjustments apply only when the related amount has received the accounting treatment specified in section 206. For example, a reserve withdrawal is not deductible merely because it appears as income. The reserve must also satisfy the conditions associated with its treatment in the prior year.
For the brought-forward loss adjustment, both figures come from the company’s books, not its income-tax return. The deduction is the lower of:
- Brought-forward book loss excluding depreciation.
- Unabsorbed book depreciation (depreciation carried forward in the company's accounts).
If either figure is nil, the deduction is nil.
Banks, insurance companies, electricity companies and other regulated entities prepare their statements under the law governing their sector. Companies following Indian Accounting Standards (Ind AS) also need to examine the additional adjustments in section 206.
How Depreciation Affects Book Profit
Depreciation recorded in the profit and loss statement is first added back when calculating book profit. The company then deducts depreciation, excluding the amount arising from asset revaluation. This means normal depreciation remains reflected in book profit, while depreciation arising from revaluation is effectively added back.
How to Calculate MAT
Use these steps:
- Calculate income tax under the normal provisions.
- Start with net profit in the statement of profit and loss.
- Add the amounts specified in section 206.
- Subtract the permitted reductions.
- Apply the MAT rate, surcharge and 4% Health and Education Cess, then compare the result with normal tax.
MAT Calculation Example
Assume a domestic company has the following figures:
| Particulars | Amount |
|---|---|
| Net profit as per statement of profit and loss | ₹60,00,000 |
| Add: current income-tax provision | ₹14,00,000 |
| Add: deferred-tax provision | ₹2,00,000 |
| Add: provision for fall in asset value | ₹4,00,000 |
| Subtotal | ₹80,00,000 |
| Brought-forward book loss | ₹3,00,000 |
| Unabsorbed book depreciation | ₹8,00,000 |
| Less: lower of the above two amounts | ₹3,00,000 |
| Adjusted book profit | ₹77,00,000 |
Particulars
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The MAT calculation is:
- MAT at 14%: ₹10,78,000
- Health and Education Cess at 4%: ₹43,120
- Total MAT liability: ₹11,21,120
Assume the company has normal taxable income of ₹30,00,000 and qualifies for a 25% normal corporate-tax rate. Normal tax is ₹7,50,000, and cess is ₹30,000, producing a normal liability of ₹7,80,000.
The company pays ₹11,21,120 because MAT is higher. The 25% normal rate is used only for this example. The actual normal rate depends on the company’s tax regime and eligibility conditions.
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When entries affecting book profit are revised, review what changed, who made the change, and when it occurred.
Surcharge and Cess
Surcharge is an additional tax on income above specified limits. For FY 2026-27, the general company surcharge rates are:
| Company Type | Income used to determine the surcharge | Surcharge |
|---|---|---|
| Domestic company | Above ₹1 crore and up to ₹10 crore | 7% |
| Domestic company | Above ₹10 crore | 12% |
| Foreign company | Above ₹1 crore and up to ₹10 crore | 2% |
| Foreign company | Above ₹10 crore | 5% |
Company Type
Income used to determine the surcharge
Surcharge
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Income used to determine the surcharge
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Add 4% Health and Education Cess to the income tax and surcharge. For companies just above a surcharge threshold, the FY 2026-27 tax rules provide marginal relief, so the tax increase does not exceed the income above that threshold.
MAT Credit Rules From 1 April 2026
MAT credit is the excess MAT paid over normal tax under the earlier rules, which could be used to reduce tax in later years.
The Finance Act, 2026 removed the creation of fresh MAT credit under section 206. MAT paid for tax year 2026-27 or a later year therefore does not produce new credit.
Credit created under old section 115JAA before 1 April 2026 is not automatically cancelled. The unused old credit continues under the new Act, subject to the revised conditions and its original time limit.
| Credit Type | Treatment From 1 April 2026 |
|---|---|
| MAT paid under the new section 206 regime | No new credit |
| Old credit held by a domestic company | Available after the company opts for section 200(5) or 201(2), subject to an annual cap |
| Annual domestic-company set-off | Limited to 25% of the tax payable for that year |
| Old credit held by a foreign company | Set off against the difference between normal tax and MAT |
| Maximum carry-forward period | Original 15-year period from the year in which the credit first arose |
Credit Type
Treatment From 1 April 2026
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Treatment From 1 April 2026
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For example, if a domestic company has old MAT credit of ₹6,00,000 and tax payable under the relevant concessional regime is ₹16,00,000, the annual set-off limit is ₹4,00,000, or 25% of ₹16,00,000. The remaining ₹2,00,000 stays available only for the unused part of its original 15-year period.
Which Forms and Deadlines Apply?
Companies must report their MAT calculation in their income-tax return. For FY 2025-26 (AY 2026-27), most companies use ITR-6. Where applicable, they must also submit a separate MAT report certified by a Chartered Accountant.
| Income Period | MAT Report | Applicable Deadline |
|---|---|---|
| FY 2025-26, AY 2026-27 | Form 29B | 21 October 2026 for companies covered by the extended 31 October return category |
| Tax year 2026-27 onward | Form 66 | The specified date under the Income-tax Act, 2025 |
Income Period
MAT Report
Applicable Deadline
Income Period
MAT Report
Applicable Deadline
For income earned up to 31 March 2026, companies use Form 29B to certify that book profit has been calculated correctly under section 115JB.
For AY 2026-27, Central Board of Direct Taxes Circular No. 07/2026 extended the applicable report date to 21 October 2026 and the income-tax return date to 21 November 2026. This extension applies to taxpayers listed in the category covered by the circular. Transfer-pricing cases follow their separate deadline.
For tax year 2026-27 onward, Rule 137 of the Income-tax Rules, 2026 prescribes Form 66. Under the current statutory schedule:
- A company with a 31 October 2027 return deadline has a Form 66 deadline of 30 September 2027.
- A company with a 30 November 2027 return deadline for a qualifying transaction report has a Form 66 deadline of 31 October 2027.
These 2027 dates remain subject to any later extension issued by the Central Board of Direct Taxes.
Records to Keep for a MAT Review
A complete MAT working should contain:
- The final statement of profit and loss.
- A ledger-level explanation for each section 206 adjustment.
- Current-tax, deferred-tax and depreciation workings.
- Book records of brought-forward loss and unabsorbed depreciation.
- A year-wise record of old MAT credit, use and expiry.
- The final Form 29B or Form 66 reconciliation.
Start the calculation from the adopted financial statements, not from taxable income. Every adjustment should link to a ledger balance, supporting document and statutory provision.
Conclusion
Minimum Alternate Tax is a second corporate-tax calculation that applies when adjusted book profit produces a higher tax than the normal provisions. From 1 April 2026, the general rate is 14%, Form 66 replaces Form 29B for the new regime, and current MAT payments no longer create fresh credit. Old credit remains usable only under the revised conditions and within its original life. Before filing, reconcile the financial statements, MAT adjustments and credit register, then have a Chartered Accountant review the final computation and report.
