Presentation on

corporate tax planning

Submitted by: ROOMAL SAXENA
SAKET GUPTA

TOPIC

PRESENTATION ON MAT

CONTENTS
What

is MAT?

Exemptions
Exceptions
Example

of Income Tax Act.

of MAT.

of MAT.

Conclusion.

WHAT IS MAT ?

Mat is alternative direct tax . It is a kind of indirect tax.

Normally, a company is liable to pay tax on the

income computed in accordance with the provisions
of the Income-Tax Act, but the profit and loss
account of the company is prepared as per
provisions of the Companies Act.

Contd..
These

companies were showing book profits

and declaring dividends to their
shareholders but were not paying any tax.
These companies are popularly known as
zero tax companies.

Exemptions of Income Tax Act.

The

Indian Income-Tax Act allows a large

number of exemptions from total income.
Besides exemptions, there are several
deductions permitted from the gross total
income. Further, depreciation allowable under
the Income-Tax Act, is not the same as
required under the Companies Act. The latter
provides a lower rate viz-a-viz the I-T Act
which computes a higher rate of depreciation.

Contd..
The

result of such exemptions,

deductions, and other incentives under
the Income-Tax Act in the form of liberal
rates of depreciation is the emergence
of zero tax companies, which in spite of
having high book profit are able to
reduce their taxable income to nil.

Exceptions of MAT
MAT

is a way of making companies pay

minimum amount of tax. It is applicable to all
companies except those engaged in
infrastructure and power sectors. Income
arising from free trade zones, charitable
activities, investments by venture capital
companies are also excluded from the purview
of MAT. However, foreign companies with
income sources in India are liable under MAT.

Contd
In

order to bring such companies under

the I-T net, Section 115JA was introduced
from assessment year 1997-98. Now, all
companies having book profits under the
Companies Act shall have to pay a
minimum alternate tax at 18.5%.

Example of MAT

For example, book profit before depreciation of a

company is Rs. 7 lakh. After claiming depreciation
and other exemptions, gross taxable income comes
to Rs. 4 lakh. The income tax applicable Rs. 1.2 lakh
at a rate of 30%. However, MAT would be Rs. 1.29
lakh (Rs. 7 lakh at 18.5%).

Contd..
The

MAT paid can be carried forward

and set-off (adjustment) against
regular tax payable during the
subsequent five-year period subject to
certain conditions.

Conclusion

Thanking you