Mat Applicability On Capital Gains

Authority for advance rulings aar held that mat is applicable on foreign companies too and this has opened pandora box.

Mat applicability on capital gains.

The amount of expenditure relatable to income being share of the assessee in the income of an association of persons or body of individuals on which no income tax is payable in accordance with the provision of section 86. Applicability of mat mat is applicable to all companies including the foreign companies. The tax rate is 15 with effect from ay 2020 21 fy 2019 20 2. The government of india has issued a welcome press release where it is provided that mat shall not be applicable to foreign companies having no permanent establishment place of business in india.

How to calculate mat. Mat is applicable only on business income i e net profit t t parwani others 21 august 2018 thanks for the reply if mat is more than long term capital gain tax even then we are not supposed to pay mat. Non applicability of mat in respect of certain foreign companies section 115jb effective retrospectively from. This will provide a much needed clarity on applicability of mat provisions to foreign companies.

Tax liability as per the mat provisions are given in sec 115jb 18 5 of book profits plus 4 education cess plus a surcharge if applicable. Provision made for diminution in the value of an asset. Analysis of provision of section 115jb where in case of a company the income tax payable on the total income as computed under the income tax act in respect of any previous year is less than 15 of its book profit then such book profit shall be deemed to be the total income of the assessee and the tax. This means long term capital gain exemption under section 10 38 are subject to mat.

Emboldened by such retrogressive orders domestic tax authorities started sending show cause demand notices left right and center to fiis for paying mat on capital gains. That capital gains would certainly be one of the various items whose information is required to be given to the shareholders under the said clause 3 xii b. This would also help in avoiding unnecessary litigation. Nikhil mehta articled assistant 14 september 2016 the intention of legislature is to tax the income on capital gains under mat provisions even when they are exempt as per normal tax provisions.

Hence it means that the income from ltcg shall remain credited to p l account and will not be deducted from net profit.