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Illustration: Calculation of Normal Tax Liability

ABC (IFSC) Pvt. Ltd. set up in a Special Economic Zone in 2013 and enjoyed a 100% deduction on export profits for the first 5 years under section 10AA. This resulted in Rs 108 of MAT credit being accumulated until assessment year 2018-19. For assessment year 2019-20, ABC's normal profit was Rs 400 and book profit was Rs 300 with Rs 108 of accumulated MAT credit. The company's normal tax liability was Rs 60 while its MAT liability was Rs 27. Therefore, the company's tax liability was Rs 60. After adjusting for MAT credit of Rs 33, the tax payable was Rs 27 with Rs 75 of MAT credit carried forward to the next year.

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82 views

Illustration: Calculation of Normal Tax Liability

ABC (IFSC) Pvt. Ltd. set up in a Special Economic Zone in 2013 and enjoyed a 100% deduction on export profits for the first 5 years under section 10AA. This resulted in Rs 108 of MAT credit being accumulated until assessment year 2018-19. For assessment year 2019-20, ABC's normal profit was Rs 400 and book profit was Rs 300 with Rs 108 of accumulated MAT credit. The company's normal tax liability was Rs 60 while its MAT liability was Rs 27. Therefore, the company's tax liability was Rs 60. After adjusting for MAT credit of Rs 33, the tax payable was Rs 27 with Rs 75 of MAT credit carried forward to the next year.

Uploaded by

ABHISHEK DUJARI
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Illustration

ABC (IFSC) Pvt. Ltd.(an IFSC) was set up in a Special Economic Zone in April 1, 2013. It enjoyed 100% deduction
for the first 5 years on normal export profits u/s 10AA, thus accounting for a total of Rs 108 MAT credit till
assessment year 2018-19 as:

Assessment Year Assumed Profit MAT liability to be paid

2014-15 Rs 100 Rs 9
2015-16 Rs 200 Rs 18
2016-17 Rs 300 Rs 27
2017-18 Rs 200 Rs 18
2018-19 Rs 400 Rs 36

Now,

Assessment Year Normal Profit Book Profit Total MAT Credit


2019-20 Rs 400 Rs 300 Rs 108

Normal Tax Rate = 30%*(plus cess and surcharge as applicable)

MAT Rate = 9% (plus cess and surcharge as applicable)

Calculation of Normal Tax Liability

Total Income = Rs 400


Less : Deduction u/s 10AA @ 50% of Total Income = Rs 200
Taxable Income = Rs 200
Normal Tax Rate @ 30% on Taxable Income = Rs 60.

Calculation of MAT Liability

Book Profits (after adjustments) = Rs 300


MAT @ 9% on Book Profits = Rs 27.

The tax liability of a company will be higher of :


(i) Normal tax liability = Rs 60, or
(ii) MAT liability = Rs 27

Thus the tax liability of ABC Pvt Ltd. will be Rs Rs 60 (plus cess as applicable) being higher than the MAT liability.

Tax Liability = Rs 60
Less : MAT credit adjusted (Rs 60 - Rs 27) = Rs 33
Tax Payable = Rs 27

Hence, MAT credit available for Assessment Year 2020-21 = Rs 75.

Note : * A domestic Company is taxable at the rate of 25% if, its turnover or gross receipt does not exceed Rs 250
crores in the previous year 2016-17. In this case, it has been assumed that the turnover of Company exceeds Rs 250 in
previous year 2016-17.

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