Applicability of Alternate Minimum Tax

Applicability of Alternate Minimum Tax All the non-corporate income tax payers are supposed to be paying AMT. The rule for applicability is that the AMT is payable if: Tax under normal Provisions (as per income tax act) is less than AMT. In this case the adjusted total income is considered to be the total income and tax liability is calculated over it. The other rule mentions that the AMT will not be paid by the individual, HUF (Hindu Undivided Family), AOP (Association of Persons) and Artificial Juridical Person if the Adjusted Total Income is not greater than Rs.20 lakhs. Non-Applicability to LLP’s incorporated under foreign Law Limited Liability Partnerships incorporated under foreign laws are not considered â€Å"Firm† as per the definition given under section 2(23) and are considered under the definition given in section 2(17). So, the provisions of AMT are not applicable to such LLPs. Applicability to foreign firms not incorporated under any Foreign Law Foreign firms which are not incorporated as pe r the foreign country law but fits into the definition of â€Å"firm† as per Indian Partnership Act,1932 is considered firm as under section 2(23). So, the provisions of AMT as per chapter XII-BA are applicable to such firms. The Alternate minimum tax liability is as per section 115JC for the income to be chargeable to tax under India. Rate The applicable rate of AMT is 18.5%, which is calculated on Adjusted Total Income. Further, the final AMT is calculated by calculating education and secondary education cess of 3% on 18.5% and surcharge if applicable. Surcharge is not applicable for LLP. A Table containing steps is included in annexure along with an illustration. The steps and illustration are given in Annexure- I and II respectively. As per the provisions of AMT, the final tax liability for the non-corporate assessees is greater of the tax as per normal provisions and Alternate Minimum Tax (Tax @ 18.5 percent (plus secondary and education cess as applicable) on adjusted t otal Income). Alternate Minimum Tax Credit Tax credit is available against future tax liability if AMT is greater than tax under normal provisions. The credit amount is the difference between the two and can be adjusted or carried forward for ten years from the year in which the credit was earned. From the assessment year 2018-19, the period will be fifteen years.The section applicable is 115JD. Set-off is available when the tax as per normal provision for LLP is more than AMT. The amount of set-off is limited to amount paid in excess of AMT. However, the rules regarding carry forward or set-off are not applicable for education and secondary education cess. Further, if the credit is not utilised within ten years then it can’t be availed later on. Interest is not paid on tax credit availed. Application of other Provisions of this Act The provisions are given under section 115JE and are applicable to the non-corporate assessee to whom AMT provisions apply. This section includes advance tax, interest as per sections 234A,234B and 234C penalty. Key points with respect to the New Chapter XII-BA