“What is AMT?”, “How to calculate AMT?”, And Applicability of AMT (Alternative Minimun Tax)

Introduction

The concept of MAT (Minimum Alternative Tax) was first adopted for business, and it was gradually extended to all other taxpayers in the form of AMT (Alternative Minimum Tax). The provisions relating to AMT are applied in a modified pattern to non-corporate taxpayers in the form of Alternate Minimum Tax, or AMT. As a result, MAT is applicable to businesses, whereas AMT is applicable to individuals. Sections 115JC to 115JF of the Internal Revenue Code deal with AMT (Alternate Minimum Tax). In this article information on “How to Calculate AMT?”, “What is AMT?” And Applicability of AMT is mentioned.

What is AMT?

Alternative Minimum Tax (AMT) is a tax that can be paid instead of the ordinary tax. The AMT rate is now at 18.5 percent (plus applicable surcharge and cess). In an FY (Financial Year), the Alternative Minimum Tax (AMT) is applied on ‘adjusted total income’ when the tax on regular income is lower than the Alternative Minimum Tax on adjusted total income. As a result, regardless of their ordinary tax obligations, persons who are subject to AMT laws must pay AMT.

AMT (Alternative Minimum Tax) Rate

• AMT is imposed at 18.5% of the adjusted total income for the non-corporate taxpayer. There will also be a surcharge and a Cess that will be applied to the non-corporate taxpayer.

• In the event of a non-corporate assessee that is engaged in the Convertible Foreign Exchange is 9%. It will also include Surcharge and Cess.

Basic provisions relating to the AMT’s applicability to various taxpayers

Every non-corporate taxpayer who has claimed a deduction under section 80H through 80RRB (excluding 80P), (ii) a deduction under section 35AD, or (iii) a deduction under section 10AA will be subject to the AMT requirements. As a result, the AMT requirements do not apply to a non-corporate taxpayer who has not claimed any deductions under the previously mentioned sections. However, the following considerations should be made in this regard.

• The AMT provisions apply to any other person (i.e., not an individual, a HUF (Hindu Undivided Family), an AOP/BOI, or an artificial juridical person), regardless of their income.

• Individuals, Hindu undivided families, associations of persons, bodies of individuals (whether incorporated or not), and artificial juridical persons are subject to AMT only if their adjusted total income (explained below) exceeds INR 20,00,000.

Furthermore, the AMT requirements do not apply to anyone who has taken advantage of the tax breaks available under sections 115BAC and 11BAD.

Source : Income Tax India

How to calculate AMT (Alternative Minimum Tax)?

The following is how the AMT tax liability is calculated:

The taxpayer must first determine his or her tax liability under the ordinary income tax system. If claimed, deductions covered by AMT, such as Section 10AA, Section 35AD, Section 80H to 80RRB,  and so on, shall be added to the tax burden.

Your adjusted income is the amount after these deductions have been taken into account. This adjusted income will be subject to an AMT of 18.05 percent. There are also additional cess and surcharges to consider. Below is the table for Adjustable income calculation and AMT calculation.

The information mentioned in AMT Report

The AMT report should have three paragraphs, according to the Institute of Chartered Accountants of India (ICAI) rules.

The first paragraph will be a declaration that the CA has examined all of the taxpayer’s essential accounts and records in order to compute the amounts appropriately.

The certification of the calculations used to arrive at the adjusted total income and the AMT will be included in the second paragraph. It will also show the entire amount of tax that the individual handles under Section 115JC.

Finally, the third paragraph certifies that the information provided in Annexure A, the attached paper, is correct.

The following are the details that must be supplied in Annexure A of the report:

• The taxpayer’s name is mentioned

• The address of the taxpayer

• PAN (Permanent Account Number)

• The total income of the taxpayer

• The entire amount of tax due as a result of this income

• Information on section 10AA deductions that have been claimed

• The year of evaluation

• Deductions claimed under Section 35AD, including the depreciation allowed by Section 32

• The adjusted total income of the taxpayer

• Deductions claimed under Sections 80H to 80RRB are listed below (except 80P)

• Alternative Minimum Tax owed by the taxpayer

Alternative Minimum Tax (AMT) Credit

The Alternative Minimum Tax (AMT) was introduced to collect taxes from tax-exempt enterprises, but it was also intended to provide the government with a constant stream of money. As a result, while minimum tax is imposed in an FY where normal tax is lower than AMT, Alternative Minimum Tax paid earlier can be carried forward and offset against normal tax to the extent of the difference between normal tax and AMT in subsequent FYs when AMT is lower than normal tax. After such a set-off, any remaining amount can be carried forward to subsequent fiscal years. This concept is known as AMT Credit.

The AMT Credit, on the other hand, can only be carried forward for up to 15 fiscal years from the year the AMT is paid. The AMT credit will vary if the ordinary tax rate changes as a result of an order issued by the IRS. Furthermore, if the person gets a foreign tax credit, any FTC (Federal Trade Commission) in excess of the AMT will be discarded (tax paid in foreign countries with which India has a Bilateral or Unilateral Tax Agreement).

Conclusion

All taxpayers subject to the AMT must get a report in Form No. 29C from a Chartered Accountant declaring that adjusted total income and AMT were computed in conformity with the regulations of the Income-tax Act, and submit the report on or before the due date for filing the ITR (Income Tax Return). The report can be filed electronically along with the Income Tax Return.