Is Minimum = Maximum? Yes.
How can the minimum be the maximum? In the Indian tax system, corporate taxpayers calculate their tax under normal circumstances and compare it to a 15% tax rate applied to a specially computed book profit. They must pay whichever is higher, which logically indicates the maximum amount due. However, this scheme is referred to as Minimum Alternate Tax (MAT). Despite the title, MAT essentially means paying the maximum between the normal tax and 15% of book profit, making the term somewhat misleading.
How did this title come about? The government noticed that many corporations, by taking advantage of numerous deductions and benefits, ended up paying little to no tax despite reporting substantial book profits and paying large dividends to shareholders. To ensure these companies paid at least some tax, the MAT was introduced. From the government’s perspective, it ensures a minimum tax payment, but from the corporations’ viewpoint, it is the maximum tax they must pay under this system. Hence, the term "Minimum Alternate Tax" can be seen as a misnomer.
By CA L.Muralidharan and CPA L.Mukundan
Visit www.sreeramcoachingpoint.com for more blogs
Contact: 6383228202 or 9884439769
Also use our app Gyanji for more utility and benefits
Best place of coaching for CPA, CMA USA & CA
