The government of India introduced the Alternative Minimum Tax (AMT) to ensure that individuals and entities benefiting from tax deductions and exemptions still contribute a minimum tax to the national revenue. This initiative prevents high-income earners from avoiding taxes entirely through exemptions or deductions while ensuring fairness in the tax structure.
In this article, we’ll explore AMT in detail, including its applicability, calculation process, and how it impacts taxpayers.
The Alternative Minimum Tax (AMT) ensures that taxpayers with high adjusted total incomes, benefiting from significant exemptions or deductions, pay a minimum amount of tax. While it follows similar principles to the Minimum Alternate Tax (MAT) applicable to companies, AMT is specifically tailored for non-corporate taxpayers, including individuals, Hindu Undivided Families (HUFs), and Limited Liability Partnerships (LLPs).
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Initially targeted at companies through MAT, the Finance Act of 2011 and amendments in 2012 extended AMT to non-corporate taxpayers. The AMT is applicable as follows:
AMT applies if taxpayers claim deductions under:
Individuals, HUFs, AOPs, BOIs, or Artificial Judicial Persons are exempt from AMT if their adjusted total income does not exceed ₹20,00,000 in a year.
Taxpayers can claim credit for excess AMT paid over regular tax liability in subsequent years. This credit can be carried forward for up to 15 years and utilized when the regular tax liability exceeds the AMT in future fiscal years.
The Alternative Minimum Tax (AMT) ensures equitable tax contributions by high-income individuals and entities while allowing them to claim credits for excess AMT paid. By balancing tax revenue and incentivizing economic growth, AMT promotes fairness and compliance in the taxation system. Proper understanding, accurate calculation, and effective record-keeping are essential for taxpayers to manage AMT effectively.
AMT applies to individuals, HUFs, AOPs, BOIs, LLPs, and partnership firms with adjusted total income exceeding ₹20,00,000 and claiming specific deductions or exemptions.
The standard AMT rate is 18.5%, with reduced rates of 15% for cooperative societies and 9% for units in IFSC earning income in convertible foreign currency.
AMT credit refers to the excess AMT paid over the regular tax liability in a financial year. This credit can be carried forward for up to 15 years and utilized when regular tax liability exceeds AMT in subsequent years.
Yes, AMT applies to SEZ units claiming deductions under Section 10AA.
No, AMT credit is non-transferable and can only be used by the taxpayer who paid the AMT.
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