Alternative minimum tax
Vipin Kumra
(Querist) 23 March 2012
This query is : Resolved
for the purpose of AMT we need to calculate the adjusted total income. does this total adjusted total income include capital gains income as well or not..
Can I please be provided with a detailed definition of "ADJUSTED TOTAL INCOME"..
A V Vishal
(Expert) 23 March 2012
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. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies.
In order to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98. According to this section, if the taxable income of a company computed under this Act, in respect of previous year 1996-97 and onwards is less than 30 % of its book profits, the total income of such company is chargeable to tax for the relevant previous year shall be deemed to an amount equal to 30 % of such book profits.
The Finance Act, 2000, inserted section 115JB of the Income-tax Act, 1961, with effect from 1-4-2001, i.e., from the assessment year 2001-02 providing for levy of Minimum Alternate Tax on companies. Section 115JB conceptually differs from erstwhile section 115JA, which provided for MAT on companies, so far as it does not deem any part or the whole of book profit as total income. However, the new provision of section 115JB provides that if tax payable on total income is less than 7.5% of book profit, the tax payable under this provision shall be 7.5% of book profit.
Computation of Book Profit :-
Book profit means the net profit as shown in the profit and loss account for the relevant previous year as increased by
1.the amount of income-tax paid or payable,
2.the amounts carried to any reserves, [other than a reserve specified under section 33AC;] or
3.the amount set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
4.the amount by way of provision for losses of subsidiary companies; or
5.the amount of dividends paid or proposed ; or
6.the amount of expenditure relatable to any income to which section 10,other than secton 10(23G) or section 10A or section 10B or secton 11 or section 12 apply ; or
7.the amount of depreciation, (Inserted by Finance Act,2006 ,w.e.f. 01-04-2007)
[ if any amount referred to in clauses ( 1 ) to ( 7 ) is debited to the profit and loss account, and as reduced by ]
the amount withdrawn from any reserve or provision
the amount of income to which any of the provisions of section 10, other than secton 10(23G) or section 10A or section 10B or secton 11 or section 12 apply, if any such amount is credited to the profit and loss account; or
the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets) (Inserted by Finance Act,2006 ,w.e.f. 01-04-2007) ; or
the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause ( iia ) ( Inserted by Finance Act,2006 ,w.e.f. 01-04-2007 ) ; or
the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.
Explanation .For the purposes of this clause,
( a ) the loss shall not include depreciation;
( b ) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or]
the amount of profits eligible for deduction under Section 80HHC, 8OHHE, 80HHF
7. the amount of profits of sick industrial company
Vipin Kumra
(Querist) 24 March 2012
the content provided by you is for calculating MAT. I on the other hand am interested in knowing the calculation of AMT. In AMT "Adjusted Total Income" is calculated, the calculation of which is different from the book profit calculated for the purpose of MAT. My question was that is " capital gain income included for the purpose of calculating adjusted total income"
I hope i am clear now.
Thank You. Looking forward for a reply.
