The Alternate Minimum Tax (AMT) is a separate tax calculation that applies to certain taxpayers in India. It ensures that individuals and businesses who have reduced their tax liability through the use of certain deductions and exemptions still pay their fair share of taxes. The AMT uses a different set of rules to calculate taxable income than the regular tax system, often resulting in a higher tax liability.
Who is Liable to Pay AMT?
The AMT applies to a broad range of non-corporate taxpayers, including individuals, Hindu Undivided Families (HUFs), and partnerships. It impacts those who have claimed specific deductions under Chapter VI-A of the Income Tax Act (except for Section 80P), Section 10AA, and Section 35AD. However, individuals and HUFs are exempt from the AMT if their adjusted total income is below Rs. 20 lakhs. Additionally, those who have opted for the new tax regime under Section 115BAC are not liable to pay AMT.
How is AMT Calculated?
The AMT is calculated based on the “Adjusted Total Income,” which adds back certain deductions claimed by the taxpayer to their taxable income. The AMT is payable if the regular tax on your total income is less than 18.5% of this adjusted total income. In such cases, the adjusted total income is taxed at a flat rate of 18.5%.
Concessional AMT Rates
A concessional AMT rate of 9% applies to units in an International Financial Services Center (IFSC) that earn income solely in convertible foreign exchange. For cooperative societies, the AMT rate is now 15% instead of the usual 18.5%.
Tax Credit and CA Certificate
If the AMT paid exceeds the regular tax liability, the excess is considered a tax credit that can be carried forward for up to 15 years. Taxpayers subject to AMT must also file a certificate from a Chartered Accountant in Form 29C, confirming the correct computation of adjusted total income and AMT.
Advance Tax and AMT
Even under the AMT provisions, taxpayers are obligated to pay an advance tax. If this is not fulfilled, interest is accrued under Sections 234B and 234C.
Conclusion
The AMT is a key provision in the Indian tax system, designed to ensure that taxpayers pay a minimum level of tax, even after utilizing certain deductions and exemptions. Understanding how the AMT is calculated and who is liable is crucial for taxpayers to maintain compliance with tax laws.
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