Minimum Alternate Tax

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 Minimum Alternate Tax (MAT) is a provision in the Indian Income Tax Act (Section 115JB) that ensures profitable companies pay a baseline amount of corporate tax. It applies if a company's standard tax liability falls below 15% of its book profits, preventing the avoidance of taxes through excessive deductions or exemptions. [1, 2, 3, 4]




How it Works

Under Indian tax law, a company must calculate its tax liability using two methods:
  1. Normal Tax Rate: Computed on the taxable income using standard corporate tax rates.
  2. MAT Rate: Computed at 15% on the company’s "book profit" (plus applicable surcharge and cess). [1, 3]
The company is required to pay whichever amount is higher. [1, 2]

Current Rates & Specifics
  • Standard Rate: 15% of book profit (plus applicable surcharge and health/education cess).
  • IFSC Units: Companies located in an International Financial Services Centre (IFSC) deriving income solely in convertible foreign exchange are taxed at a lower MAT rate of 9%.
  • Exemptions: Companies that opt for concessional tax regimes (under Sections 115BAA or 115BAB) are exempt from MAT. It also generally does not apply to certain sectors like life insurance and shipping, or certain foreign companies without a Permanent Establishment (PE) in India. [2, 6]
MAT Credit

If a company pays MAT in a given year because it is higher than its regular tax, the difference is recognized as a "MAT Credit". This credit can be carried forward to offset regular tax liabilities in future years, for up to 15 assessment years. [1, 4]

To get actionable details or compute your company's liability, refer to the Income Tax Department or consult the ClearTax MAT Guide for step-by-step calculations. [5, 7]


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