What is Alternative Minimum Tax (AMT)?
The Alternative Minimum Tax (AMT) refers to a separate tax that ensures individuals and corporations pay at least a minimum amount of tax, regardless of deductions and credits claimed on their regular tax returns. Initially introduced by the name of ‘Minimum Alternate Tax (MAT)’, AMT serves as an alternative taxation system to ensure that an alternative tax is collected from zero-tax or marginal-tax companies, to which the government provides incentives or deductions.
For non-corporate taxpayers, AMT follows similar principles but differs in specifics like applicability, income calculation and reporting requirements. The current AMT rate is 18.5% with additional surcharges and cess. It is calculated on ‘adjusted total revenue’ in a financial year where normal income tax is lower than AMT on adjusted total income.
Where is AMT Applicable?
Initially, the Alternative Minimum Tax (AMT) was introduced for companies. However, amendments in the Budget 2011 and 2012, expanded to include Limited Liability Partnerships (LLPs), non-corporate taxpayers and individuals.
AMT applies to the following entities if their total adjusted income exceeds iNR 20,00,000:
- Associating of Persons (AOP)
- Body of Individuals (BOI)
- Individuals
- Hindu Undivided Family (HUF)
- Artificial Judicial Persons.
Following conditions are applicable for AMT:
- If they claim deductions under sections 80H to 80RRB, which cover various sectors like hotels, housing projects, small-scale industries, infrastructure development, and export businesses.
- If they receive a 100% deduction on capital expenditures for businesses such as fertilizer production or cold chain facilities under section 35AD.
- If they get a 50% to 100% deduction for Special Economic Zone (SEZ) Units under section 10AA.
What are the Exemptions of AMT?
AMT provisions apply to all non-corporates and individuals except the following whose annual income is less than INR 20,00,000-
- Artificial Juridical Person
- Individuals
- Hindu Undivided Family (HOF)
- Body of Individuals (BOI)
- Association of Persons (AOP)
