Alternate Minimum Tax

Introduction

Alternate Minimum Tax (AMT) is payable by a non-company assessee whose regular tax on total income is less than 18.5% (or 9% in case of IFSC unit or 15% in case of co-operative society)of ‘Adjusted total income’. ‘Adjusted total income’ is computed by adding to the taxable income various deductions claimed by the assessee. However, an individual or a Hindu undivided family (HUF), or an association of persons (AOP), or a body of individuals (BOI), or an artificial juridical person (AJP) is not liable to pay AMT if adjusted total income does not exceed Rs 20 lakhs. Further, the provisions of AMT don’t apply in the case of an assessee who opts for the alternative tax regime of Sections 202, 203, and 204.

1. About AMT

1.1. Who is liable to pay AMT?

Every assessee (other than a company) is subject to Alternate Minimum Tax (‘AMT’) if he has claimed any of the following deductions:

(a) Deduction under any provisions (other than section 149) included in Chapter VIII-C;

(b) Deduction under Section 46 as reduced by depreciation under Section 33, assuming no such deduction was allowed.

1.2. Who is not liable to pay AMT?

The following assessees shall not be subject to AMT:

(a) A corporate assessee (as they are subject to Minimum Alternate Tax);

(b) An assessee who has not claimed any of the deduction (as specified above) in the relevant tax year;

(c) An individual or a Hindu undivided family (HUF) or an association of persons (AOP) or a body of individuals (BOI) or an artificial juridical person (AJP) provided the adjusted total income of such person does not exceed Rs 20 lakhs; and

(d) An assessee who has opted for the concessional tax regime under Section 202(1), Section 203(5) or Section 204(2).

(e) Any specified fund referred to in Schedule VI (Note 1)(g).

1.3. When is AMT payable?

The alternate minimum tax is payable by the assessee if the tax payable by him on his total income (computed as per normal provisions of the Act) is less than the tax computed on adjusted total income at the prescribed AMT rates. In such a case, the adjusted total income is treated as the assessee"s total income, and tax is levied on it at the AMT rates. The AMT rates prescribed for assessee are as follows:

(a) AMT rate in case of a unit in IFSC

Where an assessee is a unit in an International Financial Services Center deriving income solely in convertible foreign exchange, the rate of the alternate minimum tax shall be 9%.

(b) AMT rate in case of a co-operative society

Where an assessee is a co-operative society, the rate of the alternate minimum tax shall be 15%.

(c) AMT rate in the case of others

Where an assessee falls in any category other than those specified above, the rate of the alternate minimum tax shall be 18.5%.

Further, even if the tax is payable as per the provisions of the alternate minimum tax, the assessee shall be liable to pay advance tax. In case of failure, the interest shall be charged under Sections 424 and

1.4. How to determine the AMT liability?

The tax liability as per the provisions of AMT shall be the higher of the following:

(a) Tax payable on total income computed as per normal provisions of the Act;

(b) Tax payable on the adjusted total income computed at the rate of 9%/15%/18.5%.

The final tax liability shall be increased by the applicable surcharge and health and education cess.

1.5. How to compute Adjusted Total Income?

The adjusted total income shall be computed in the following two steps:

Step 1: Calculate the total income as per normal provisions of the Act.

Step 2: The total income so computed in Step 1 shall be increased by the following amounts:

(a) Deduction claimed under Chapter VIII-C (i.e., Sections 138 to 152 except for Section 149);

(b) Deduction claimed under Section 144 in respect of newly established unit in Special Economic Zone; and

(c) Deduction claimed in respect of expenditure on specified business under Section 46, as reduced by the amount of depreciation allowable as if no deduction under Section 46 had been claimed on such assets.

Example,

Particulars of income earned and deductions claimed during the year by Mr. X are as follows:

1.6. Chartered Accountant’s certificate for AMT computation

Every assessee who is subject to this provision shall file a certificate from a Chartered Accountant in Form 67 to the effect that the adjusted total income and AMT have been correctly computed. The report shall be filed one month before the due date of furnishing the return of income under section 263(1).

References

GIE Jewels vs. Income Tax officer, [2017] 88 taxmann.com 290 (Jaipur - Trib.)

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