Alternate Minimum Tax Credit

Introduction

The excess of alternate minimum tax over the tax payable as per regular provision is accumulated as AMT Credit. Such credit can be carried forward for 15 tax years immediately succeeding the initial tax year in which tax credit is allowed. It can be utilized in the year in which the assessee is liable to pay tax under normal provisions of the Act.

1. About

1.1. When AMT credit arise?

The alternate minimum tax is payable by the assessee (other than a company) if the tax payable by him on his total income (computed as per normal provisions of the Act) is less than 18.5% (or 9%

The tax paid by way of alternate minimum tax in excess of the amount of tax as per general provision is deemed as AMT Credit.

1.2. How to determine AMT credit?

The AMT credit shall be computed in the following manner:

While computing the AMT credit, applicable surcharge and health and education cess shall be included in both AMT liability and normal tax liability. The AMT credit shall be increased or decreased where normal tax is increased or decreased due to an assessment order or an order by the appellate authorities.

Example, if the tax payable by an assessee under normal provisions is Rs. 75 Lakhs and Rs. 1 Crore as per the AMT provision, the AMT credit of Rs. 25 lakhs will be available to the assessee.

1.3. Carry forward of AMT credit

The AMT credit is allowed to be carried forward for 15 tax years immediately following the initial year in which tax credit is allowed. If the credit is not fully set-off within 15 years immediately following the tax year in which it has become allowable, the unutilized AMT credit shall lapse.

Example                                                                                                                               

(Amount in thousands)

* As AMT credit of Rs. 3 thousand (belonging to the amount carried forward from year 1) have not been utilised within 15 years, it shall not be allowed to be carried forward after the expiry of 15 years and same shall lapse.

Exception 1: Credit attributable to Foreign Tax Credit

The amount of AMT credit can’t be carried forward to the extent such credit relates to the difference between the following:

1. Amount of foreign tax credit allowed against AMT;

2. Amount of foreign tax credit allowable against tax computed under regular provisions of Act.

Example

Exception 2: Assessee opts for Section 202 or Section 203 or Section 204

The assessee who has opted for payment of tax at concessional rates as prescribed under Section 202(1) or Section 203(5) or Section 204(2) shall not be allowed to carry forward and set off the AMT credit lying unutilised, consequent to exercise of such option.

1.4. How to utilize AMT credit?

The AMT credit can be utilized in the year in which the assessee is liable to pay tax under normal provisions of the Act. The AMT credit can be set off to the extent tax payable on total income under normal provisions (including surcharge and cess) exceeds the tax payable on Adjusted total income (including surcharge and cess). In other words, the amount of AMT credit can be utilised to the extent that the net tax payable by the assessee during the year does not fall below the AMT.

Example

Particulars of income earned by Mr. A during the year 2025-26 and 2026-27 are as follows:

1.5. No Interest payable on credit allowable

No interest will be payable on tax credit allowable to the assessee as computed above.

References

This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.