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Mat stands for Minimum Alternate Tax. It was formulated for the zero tax companies who didn’t pay taxes and would get away with paying income tax. Minimum Alternate Tax was established to let these zero tax companies pay the minimum income tax required to be paid to the government. The companies have an advantage that they can deduct their tax by certain provisions under the Income-Tax act of 1961. There have been a lot of cases where many companies claimed and proved that they were non-taxable and drew huge profits.
Application of Mat
The minimum alternate tax applies to companies with a taxable income of less than 15.5% under the income-tax provisions or Act of 1961.
The applicability of Mat is mostly on the zero tax companies. However, because of the Alternative Minimum Tax, the foreign companies that have established a grip on the Indian market are also liable to pay taxes to the government. Due to the Income-tax act of 1961, the companies used to take advantage of this and get off with the taxes, which made them a lot of profit.
Mat came into existence in the year 1988 under the government of India. It was introduced to the people under the finance act 1987, which held that the companies have to pay a certain percentage of tax to the government.
Calculating Mat
The Alternative Minimum Tax is calculated only when the taxable percent is less than 15.5 % under the provisions or supply of the Income-tax.
Example
Suppose a company gets a net profit of rupees 1000 cr, and it has to pay the tax of rupees 150 cr to the government. After the deduction, reduction and applying other forms to reduce the tax, if it is reduced to 100 cr and no the company has to pay the 50 cr tax as Mat then, and there the company can use the Mat credit to pay the tax in the future.
What is Mat’s credit?
Mat credit can be described as the difference between the two taxes, which are the regular tax and the tax payable under Mat. Mat tax continues for 15 years. A company or an individual can pay the tax until 15 years of the Mat tax is issued. It also gives the customer or the company a trust factor. Because of the Mat credit, the Application of the Mat becomes easy.
Features of Mat regime
Here are some of the basic features of the mat regime.
Mat credit
As mentioned above also, mat credit is one of the most important features of the Mat. Regime. It is the difference between the regular tax and the progressive tax or the tax under Mat, payable for 15 years. This makes it easy and convenient for the company or the party responsible for paying tax.
Mat report
Next to Mat credit comes another essential feature of the mat regime: Mat report. Each and every company that is liable to pay taxes under the Income- Tax Act is also responsible for providing a Mat report to the government of India in the supply of 29B form. The 29B form can be described as a report under section 115JB for formatting the companies’ net profit or book profit.
Prepayment of taxes
Every taxpayer has to pay the tax in advance if the amount is 10,000 or more for all the companies and individuals or any taxpayer. Any taxable amount above 10,000 or more is advanced payable to the government of India under the Income-tax Act of 1961.
AMT
AMT stands for Alternate minimum tax AMT, and Mat is similar. The alternative minimum tax and the Minimum alternate tax correspond to each other. When Mat was introduced in the market, it was applied only to the companies, the companies that gave zero taxes or provided data free of taxes under the Income-tax act of 1961. But gradually, Mat transformed into some sort of Amt. That is from companies to any other taxpayer in the form of Alternate minimum tax.
Conclusion
Mat is still in practice and will be in practice for a long time. Because of this, many things in India’s economy have also changed. Minimum Alternate Tax has increased the amount of pending taxes in the country. Every company has to pay 15 percent of the book profit incurred. This has also increased the cash flow in the market. As the cash flow in the market increases, the country’s economy also increases. That was all about the Alternate Minimum Tax(MAT) in the country.
