13 Tax Deductions Now Create MAT Problem ! Should I Say AMT !

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Updated

Budget 2012 has the bad news for any one who is dreaming of claiming tax deductions u/s 10 AA or under Part C of Chpater VIA or Section 35D ( this is updated till 2015) and getting away tax free income .This dream is shattered as the section 115JC is substituted by Finance Bill 2012  to provide a law which will make you liable to pay ALT of 18.5 % of adjusted total income if any one of the 27 tax deductions  are claimed .

Under the existing provisions of the Income-tax Act, Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) are levied on companies and limited liability partnerships (LLPs) respectively. However,
no such tax is levied on the other form of business organizations such as partnership firms, sole proprietorship, association of persons, etc. Now Budget 2012 , Finance Minister has proposed taxing an entity who by virtue of any claim of tax deductions u/s 10 AA or any deduction under Part C of Chapter VIA or section 35D , are not in the tax bracket , shall have to pay alternate minimum tax  .

Alternate Minimums Tax or MAT on  Even Individuals?

Yes, anyone  who claims tax deductions as stated below will be labile to pay alternate minimum tax @ 18.5 % of adjusted total income. This is provided by substituting section 115JC of the Income Tax Act which was previously  applicable only for LLP . The heading of the said section is now “PERSONS OTHER THAN A COMPANY”

Any way out of Alternate Minimums Tax

Only saving grace is that  the provisions of AMT ( Alternate Minimum tax ) under Chapter XII-BA 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 section 2(31)(vii) if the adjusted total income of such person does not exceed twenty lakh rupees.

So what are those 27  tax deductions ?

It has been provided that anyone who claims any of the following deduction shall be liable to pay alternate minimum tax @ 18.5 % of adjusted total income.

  1. 10AA  Special provision in respect of newly established undertakings in free trade zone, etc.
  2. 80-IA Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
  3. 80-IAB Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone
  4. 80-IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings
  5. 80-IC Special provisions in respect of certain undertakings or enterprises in certain special category States
  6. 80-ID Deduction in respect of profits and gains from business of hotels and convention centres in specified area
  7. 80-IE Special provisions in respect of certain undertakings in North-Eastern States
  8. 80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste
  9. 80JJAA Deduction in respect of employment of new workmen
  10. 80LA Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre
  11. 80QQB Deduction in respect of royalty income, etc., of authors of certain books other than text books
  12. 80RRB Deduction in respect of royalty on patents
  13. Section 35D

So be ready for paying 18.5 % of alternate minimum tax if you claim any of the aforesaid deduction !