Alternate Minimum Tax (AMT) was introduced by the Finance Act, 2011 w.e.f. 01.04.2012 on Limited Liability Partnerships (LLP). Later on by the FA 2012 this has been extended to all assesses other than companies. For companies we find separate provisions for MAT.
The applicability:
The AMT will apply only to those assesses who prefer claim of exemption under section 10AA and deductions under Chapter VIA- C – in relation to certain incomes (except deduction u/s S.80P).
In case of individual, HUF, AOP and BOI further relaxation from AMT is provided if the adjusted total income does not exceed Rs.20 lakh.
Effective sections for AY 2013-14 which will be hit by AMT:
Section 10AA- SEZ units.
Sections of Chapter VIA- C:
Many of deductions under Chapter VIA –C, have been phased out and only few are still in force. The effective deductions shall also have limited effective life and they will be phased out or become ineffective gradually over some years.
The effective sections under which claims against certain incomes will be available for AY 2013-14 and which will be hit by provisions of AMT are as follows:
Section 80-IA – infrastructure development
Section 80-IAB – development of SEZ.
Section 80 IB- certain industrial undertakings and enterprises .
Section 80-IC- undertakings in certain special category states.
Section 80-ID- hotel and convention centers in specified area.
Section 80-IE- certain undertaking in North Eastern States.
Section 80JJA- collection and processing of bio degradable waste.
Section 80JJAA- employment of new workman.
Section 80LA – offshore banking units and international financial service center.
Section 80 QQB- certain royalty to authors of books.
Section 80RRB – Royalty on patents.
Option in hands of assessee:
If an assessee does not want to fall under provisions of AMT, he can avoid the same by not preferring claims under specified sections. Thus where regular tax is nil, or where there is loss or where it is prudent to pay regular tax, as per regular computation, assessee may not make a claim of exemption u/s 10AA and deductions under chapter VIA-C. In such situations provisions of Chapter XII-BA will not apply. taxmanagementindia.com
Analysis of provisions:
Analysis of provisions of Chapter XII-BA:
In the following table, in left column provision is reproduced with highlight for analysis and in right column analytical remarks are made for easy understanding.
CHAPTER XII-BA
Special provisions for payment of tax by certain persons other than a company w.e.f.01.04.2013 (Asst. year 2013-14 relating to PYE 31.03.2013)
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Remarks:
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Special provisions for payment of tax by certain persons other than a company
115JC. Special provisions for payment of tax by certain persons other than a company.
115JC. (1) Notwithstanding anything contained in this Act, where the regular income-tax payable for a previous year by a person, other than a company, is less than the alternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of that person for such previous year and he shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent.
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The provisions as amended will apply w.e.f. 01.04.2013, that is relating to current previous year which will end on 31.03.2013 in relation to assessment year 2013-14.
The amended provisions shall apply to all assesses other than companies for which separate MAT provisions are found in S.115JB.
The primary condition for applicability is normal tax should be less than alternate minimum tax (AMT).
AMT will be 18.5% of adjusted total income.
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(2) Adjusted total income referred to in sub-section (1) shall be the total income before giving effect to this Chapter as increased by—
(i) deductions claimed, if any, under any section (other than section 80P) included in Chapter VI-A under the heading "C.—Deductions in respect of certain incomes"; and
(ii) deduction claimed, if any, under section 10AA.
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The other condition for application of AMT is that assessee should have claimed deduction under Chapter VIA {except S.80(P)} and section 10AA. In case there is no such claim than question of AMT will not apply.
In those cases these deductions shall be added back to regular income to determine adjusted total income.
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(3) Every person to whom this section applies shall obtain a report, in such form as may be prescribed, from an 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 sub-section (1) of section 139.]
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A report from CA is required in prescribed form that is Form 29C under Rule 40BA. The report is to be furnished to the Assessing Officer before due date u/s 139(1).
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[1]Tax credit for alternate minimum tax.—
115JD. (1) The credit for tax paid by 2[a person under section 115JC shall be allowed to him] in accordance with the provisions of this section.
(2) The tax credit of an assessment year to be allowed under sub-section (1) shall be the excess of alternate minimum tax paid over the regular income tax payable of that year.
(3) No interest shall be payable on tax credit allowed under sub-section (1).
(4) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of subsections (5) and (6) but such carry forward shall not be allowed beyond the tenth assessment year immediately succeeding the assessment year for which tax credit becomes allowable under sub-section (1).
(5) In any assessment year in which the regular income-tax exceeds the alternate minimum tax, the tax credit shall be allowed to be set off to the extent of the excess of regular income-tax over the alternate minimum tax and the balance of the tax credit, if any, shall be carried forward.
(6) If the amount of regular income-tax or the alternate minimum tax is reduced or increased as a result of any order passed under this Act, the amount of tax credit allowed under this section shall also be varied accordingly.
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Tax credit for excess of AMT over regular tax, can be availed if the assessee has regular tax payable in excess of AMT in any of ten years subsequent to the year to which AMT payment relates.
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115JE. Application of other provisions of this Act.—Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to a person referred to in this Chapter.
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Other provisions of the Act shall apply.
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Application of this Chapter to certain persons.
1[115JEE. (1) The provisions of this Chapter shall apply to a person who has claimed any deduction under— (a) any section (other than section 80P) included in Chapter VI-A under the heading "C.—Deductions in respect of certain incomes"; or
(b) section 10AA.
(2) The provisions of this Chapter shall not apply to an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, if the adjusted total income of such person does not exceed twenty lakh rupees.]
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The provisions of this section will apply to assessee who make claim of deduction under Chapter VIA {except S.80(P)} and section 10AA. In case there is no such eligible claim or the assessee does not make such a claim, than the provisions of this chapter shall not apply.
Thus it is optional on assessee to make a claim or not to make a claim. He can refrain by not making claim and by not filing prescribed report.
Furthermore in case of individual, HUF AOP and BOI the provisions shall not apply if the adjusted total income of such person does not exceed Rs. twenty lakh.
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Interpretation in this Chapter.—
115JF. In this Chapter—
(a) “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
(b) “alternate minimum tax” means the amount of tax computed on adjusted total income at a rate of eighteen and one-half per cent;
(d) “regular income-tax” means the income-tax payable for a previous year by a person on his total income in accordance with the provisions of this Act other than the provisions of this Chapter.’
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