The clarifications are in the form of 14 frequently asked questions faqs. Adjustments to book profits for mat computation can be grouped into following two categories. Thus, where ever the legislature intended to adjust the book profits by an amount of income other than that credited to the statement of profit and loss, the condition of credit of income has not been incorporated in the relevant clauses of explanation 1. Cbdt circular of clarifications faqs on computation of s. Adjustments relating to firsttime adoption of ind as. Conundrum on brought forward loss treatment under mat taxsutra. Calculation of mat credit applicability of minimum. For computation of book profit, one may proceed as follows. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb.
The central government today notified the revised from no. It has been recommended that these items should be included in the book profits for mat purposes at an appropriate point of time. Cbdt notifies rules for computation of interest income. Mat provisions require book profit off to the lower number. Minimum alternate tax mat relating to ind as compliant companies. Exempt capital gains are to be excluded while computing. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb step 1. Framework for computation of book profit for the purpose. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and. Mat book profit one stop solution for gst, income tax. Whereas book profit is computed on the basis of schedule vi of the companies act, 1956. Therefore, to counter this, as system of mat was introduced.
Affects both transition amount and post ind as transition mat computation. Cbdt clarifies on computation of book profit for the purposes. As per the finance act, 2017, mat would be calculated using the profits as per the statement of profit and loss before oci as per ind as the starting point. Book profit us 115jb to be reduced by exempted capital gain.
Cbdt issues faqs for computing bookprofits under mat for indas. Book profit definition, examples how to calculate book. Ind as compliant companies shall be required to bifurcate their profit or loss account into following two parts i. A company has to pay mat or tax as per normal provisions, whichever is higher. Framework for computation of book profit for the purpose of. V acit 69sot 433mum assesseecompany claimed exemptionundersection 1038. Faqmat book profit computation for ind as compliant companies. The provisions of section 115jb provide for levy of mat on basis of book profits, i. Gujarat organics ltd, mumbai vs assessee indian kanoon. Where in the case of a company, the incometax payable on the total income as computed under the incometax act, is less than15% of its book profit, such book. Government of india ministry of finance department of revenue central board of direct taxes. Easing the mat credit mechanism and simplifying the mat computation provisions on the lines suggested in this paper would help rationalise.
Minimum alternate tax mat whereby a companys tax liability as per regular provisions is to be tested against a specified percentage of its book profits. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Facts of the case during the assessment year, the taxpayer excluded income earned from its project in bangladesh, malaysia and united kingdom from the computation of mat, on the ground that the income earned in foreign countries was not taxable in india under the tax treaty and. Broadly speaking book profit in context of mat means profit as shown in the profit and loss account adjusted by additions and deductions as provided in respective sections that is section115j, section115ja and section 115jb. In 2001, the mat provisions were again modified so that the comparison would now be between 7. To bring clarity on the tax implications of transition to ind as, budget 2017 proposed certain amendments to section 115jb.
Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. The said faqs have been issued pursuant to the recent report of the mat ind as committee submitted in june 2017. Computation of book profit under sec 115jb income tax forum. However, icds did not cover the issues relating to computation of minimum alternate tax mat, which is based on book profits and for. Cbdt issues faqs on computation of book profit for levy of mat and. Exempt capital gains are to be excluded while computing book. The minimum alternate tax mat on companies challenges. Govt notifies new form 29b for computing book profits of.
As a result, effectively no tax is payable even us. Under existing rules, book profit is calculated as per. Book profit us 115jb to be reduced by exempted capital gain q. Clarifications on computation of book profit of minimum alternate tax mat for ind as compliant companies. Accordingly, mat would be calculated using the profits as per the statement of profit and loss before other comprehensive income oci, as the starting point. Fvtpl classified financial instruments are included in book profits for mat computation, therefore, mtm losses on such instruments recognised through statement of profit and loss would not require any adjustments as provided under clause i of explanation 1 to section 115jb2 of the act.
The period of carry forward for the credit was kept at 5 years. Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. Cbdt issues faqs on computation of book profit for levy of. If you pick pat from the profit and loss ac then only you will be required to make adjustment for tax. May 24, 2016 the provisions of section 115jb provide for levy of mat on basis of book profits, i. Nov 20, 2012 while computation of book profit for mat calculation under sec 115jb do we have to include the income exempted under sec 10aa among the deductions from net profit as per schedule vi income tax tax queries. The minimum alternate tax mat on companies challenges and. No 3232015tpl government of india ministry of finance department of revenue central board of direct taxes tpl division dated 25th july, 2017. Whereas, ddt is not claimable as deduction out of the book profit. Items treatment under ind as the point of time it will be included in book profits 1 changes in revaluation surplus of property, plant or equipment ppe and intangible assets ind as 16. Nontaxable income under a tax treaty cannot be reduced. Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987, vide section 115j of the income tax act, 1961 it act, to facilitate the taxation of zero tax companies i. Ddt as it must be added to book profit while computing mat.
Mat stands for minimum alternate tax, described as a direct tax that has to be paid by the companies that are enjoying tax benefits or tax exemptions, instead of having huge profits, under various schemes framed under income tax act. The said faqs have been issued pursuant to the recent report of the matind as committee submitted in june 2017. Computation of book profits by ind as compliant companies. The computation method is relevant for companies preparing financial statements under erstwhile as. Clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian. As the profit and loss account is subject to notes and qualifications thereon, the profit shown in the profit and loss account may have to be adjusted with the. Section 115jb speaks about the minimum tax that a company is required to pay. The procedure for the computation of book profit as per. Jul 25, 2017 clarifications with faqs on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 f. Apr 20, 2019 when a company pays tax under mat, the tax credit earned by it shall be an amount which is the difference between the amount payable under mat and the normal tax. Book profit under income tax act in the context of mat.
Calculation of book profits for the purpose of mat section. Home faqs for computing book profits under mat for indas compliant. Faq on mat computation for ind as compliant companies. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation.
The objective of introduction of mat is to bring into the tax net zero tax companies which in spite of having earned substantial book profits and having paid handsome dividends, do not pay any tax due to various tax concessions and incentives provided under the incometax law. Here it arrives after applicable additions or deductions made to net profit as shown in the statement of profit and loss. Computation of book profits would be calculated as under a stepi. Cbdt clarifies on computation of book profit for the. Cbdt amends the report on computation of book profits for ind.
For computing mat, book profits as computed under section115jb are the base. Therefore, entire tax payable in india, in respect of incomes covered by the relief provision is deductible. Computation of book profits by ind as compliant companies for. Cbdt issues faqs for computing bookprofits under mat for. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies.
Govt notifies new form 29b for computing book profits of the. Minimum alternative tax mat and computation of book profits. Sep 11, 20 crack cs professional in the 1st attempt. Cbdt amends the report on computation of book profits for. Clarifications with faqs on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 f. Minimum alternate tax part iii computation of book profits. Cs professionalcomputation of book profit from mat on. Jan 14, 2011 provisions of mat for payment of tax by certain companies section 115jb tax payable for any assessment year cannot he less than 15% of book profit. Tax computed in above manner can be termed as normal tax liability. Conundrum on brought forward loss treatment under mat. Mat is calculated as 15% of the book profit of the tax assesse. Faqs for computing book profits under mat for indas. Adjustments relating to annual ind as financial statements. Under mat, such companies are made liable to pay to the government, by deeming a certain percentage of their book.
Aug 21, 2017 the central government today notified the revised from no. These items shall be included in book profits for mat purposes at the point of time as specified below sl. Nontaxable income under a tax treaty cannot be reduced from. Aligning the computation of book profits under the act with the logic of the revised provisions of the companies act would help rationalise the book profit. Faqs on minimum alternate tax mat relating to ind as.
Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company. The finance act, 2017 also provides certain adjustments to book profits for mat computation. Hence, the circular relied upon by the assessee cannot be. Computation of book profit as per mat provisions as per explanation 1 to section 115jb2 book profit for the purposes of section 115jb means net profit as shown in the statement of profit and loss prepared in accordance with schedule iii to the companies act, 20 as increased and decreased by certain items prescribed in this regard. Clarifications on computation of book profit for the purposes of levy of mat under section 115jb of. As per the finance act, 2017, mat would be calculated using the profits as per the statement of profit and. Similarly, the profits of the preceding years have to be reduced from business loss, when the same was lower of the two2 in the preceding year. Jul 26, 2017 framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. Faqs on computation of book profit to levy mat for ind as. In book profit computation, long term capital gains as computed after claiming indexed cost was sought to be included under bracketed portion ofclause iiofexplanation1to section 115jb. Mark to market gainslosses on financial instruments at fair value through. Mat taxation view 1 vdecisions dharmayug investmentsltd. Income by way of ltcg referred to in section 1038 is not to be reduced and the same is liable to mat.
Below is an illustrative list of such items along with the recommended treatment of mat sr no. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Proposed computation of mat for ind as compliant companies. Provisions of mat for payment of tax by certain companies section 115jb tax payable for any assessment year cannot he less than 15% of book profit. Calculation of mat credit applicability of minimum alternate tax. However, the mat provisions, although seemingly simple and exhaustive, have always been a subject of controversies and litigation. Capital receipts and book profits mat no longer a self. Minimum alternate tax mat us 115jb of income tax act, 1961. To study in detail, we can categorize the adjustments to book profits for mat computation into following two categories. Whether the profit arising on transfer of development rights to the fully owned subsidiary company is required to be included in the book profit under section 115jb of the income tax act, 1961the act. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. Apr 06, 2011 is exempt income really taxable under mat. These requirements should be read together with the existing provisions for.
Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Nontaxable income under a tax treaty cannot be reduced from book profits for the computation of mat february 2020 recently, the delhi bench of incometax appellate tribunal the tribunal in the case of ircon international limited1 the taxpayer held that the taxpayer is not entitled to claim reduction in. In the first year of adoption of ind as, the companies would prepare ind as financial statement for reporting year with. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q. Items treatment under ind as the point of time it will be included in book profits 1 changes in revaluation surplus of property, plant. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and not merely restrict the amount set off to the lower number august 21, 2018. Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb 2. Clarifications on computation of book profit for the. Regular profit is the profit computed by applying the provisions of tax laws. One such recent controversy discussed in this article revolves around the inclusion or otherwise of capital receipts in the book profits. O seems to have acted beyond the provisions laid down in section 115jb and has made the.
Get indias best faculty video classes for best study at home. Jul 29, 2016 the income tax act contains a special mechanism i. Our comments the issue of whether exempt capital gains credited to the profit and loss account can be excluded while computing book profits under the provisions of mat has. Items that would not require an adjustment for computing book profits for the purposes of mat.
Therefore, the convergence date has been clarified to be march 31, 2016. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Mat book profit computation 115jb for ind as compliant. Calculation of book profits for the purpose of mat section 115jb. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. After extensive research, the author makes out a strong case to contend that exempt income was never intended to fall within the concept of book profits in s. Calculation of book profits for the purpose of mat.
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