What Is Mat Tax Credit

When any amount of tax is paid as mat by the company then it can claim the credit of such tax paid in accordance with the provision of section 115jaa.

What is mat tax credit.

When mat for a company is greater than its normal tax liability the difference between the mat and normal tax liability is called mat credit. One can find provisions relating to carry forward and adjustment of mat credit in section 115jaa. Tax paid as per mat calculation income tax payable under normal provision of income tax act 1961. However the increase in mat rates over the years has made it extremely difficult for companies to avail their mat credit even though the carry forward period.

With mat companies have to pay up a minimum amount of tax to the government. 8 lakh while the liability as per the provisions of mat is rs. In india mat is levied under section 115jb of the income tax act 1961. Tax it pays because of mat as against its regular tax liability in a particular year to be utilised in a future year as a credit against its regular tax liability.

Such excess of tax credit is allowed to be carried forward and set off in the financial year in which the company is liable to pay tax under the general provisions of the income tax act. A new tax credit scheme is introduced by which mat paid can be carried forward for set off against regular tax payable during the subsequent seven year period subject to certain conditions as under when a company pays tax under mat the tax credit earned by it shall be an amount which is the difference between the amount payable. This mat credit can be carried forward and set off for 10 consecutive assessment years succeeding the year in which the tax credit first accrued. What is mat credit.