MAT and AMT After the Income-tax Act 2025: What Changes for Companies, LLPs and Individuals?
Why fresh MAT credit stops, who must still pay AMT, and how new rules reshape minimum tax for Indian businesses and professionals
What Are MAT and AMT — And Why Do They Matter?
Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) ensure businesses and certain non-corporate taxpayers pay a minimum level of tax, even when eligible deductions or incentives reduce regular taxable income to very low (or zero) levels.
- MAT applies to companies.
- AMT applies to non-corporate taxpayers, such as individuals, HUFs, AOPs, BOIs and artificial juridical persons, who claim certain deductions.
Both rules are designed to widen the tax net by requiring a minimum effective tax when "normal" tax otherwise falls below a specified threshold.
MAT Under the Income-tax Act, 2025: Who Must Pay, Who Is Exempt
Who is Covered?
A company must pay MAT if its total tax calculated under regular provisions is less than 14% of its book profit (plus surcharge and cess).
- For IFSC companies (i.e., companies in International Financial Services Centres) earning only in convertible foreign exchange, the MAT rate drops to 9% plus surcharge and cess.
Who Is Exempt from MAT?
Some companies are outside MAT under specific conditions:
- Certain domestic companies that have opted for alternative (concessional) tax regimes under the Act.
- Life insurance companies.
- Shipping companies taxed on a tonnage basis.
- Foreign companies meeting prescribed conditions, such as not having a place of business in India or deriving only capital gains on certain securities.
Special Rule for Companies Converting to LLP
If a private company or unlisted public company converts into an LLP, any unutilised MAT credit lapses and cannot be carried forward.
Book Profit and the MAT Calculation
Book profit for MAT is based on the net profit as per the company’s profit and loss statement (per Schedule III, Companies Act, 2013). Specific additions and deductions must be made as prescribed in Section 206.
- Ind AS-compliant companies (using Indian Accounting Standards) face extra adjustments, especially for items recorded in other comprehensive income (OCI) or fair value adjustments.
The Big Change: No New MAT Credit Under the 2025 Act
A major shift: Under the Income-tax Act, 2025, companies can no longer accrue fresh MAT credit.
- Only MAT credit already accumulated under Section 115JAA of the repealed Income-tax Act, 1961 can still be used.
- For companies under concessional tax regimes, set-off against MAT credit is capped at 25% of the credit attributable to the assessment year.
Practical impact: Companies accustomed to banking MAT credit for future years can no longer do so; only past balances (under old law) can be set off, and only in part for those who enter concessional regimes.
Example: Old vs. New MAT Credit Treatment
| Scenario | Eligible for New MAT Credit? | Carry Forward Old MAT Credit? |
|---|---|---|
| MAT under old Act (pre-2025) | Yes | Yes |
| MAT after 2025 Act | No | Only balance from old Act (with limits) |
AMT for Non-Corporate Taxpayers
AMT targets individuals, HUFs, AOPs, BOIs, and others (except companies) who have adjusted total income above Rs. 20 lakh and claim specified deductions or incentives.
- AMT rate: 18.5% plus surcharge and cess (standard); 9% for IFSC units with foreign currency income; 15% for co-operative societies.
- Out of AMT: Taxpayers in concessional regimes and certain specified funds do not face AMT.
Carry-Forward of AMT Credit
If you pay AMT (because your normal tax is lower), the extra paid can be carried forward for 15 assessment years. It can be set off against regular income tax in any year when normal tax exceeds AMT, but no interest is paid on this credit.
Compliance: Mandatory CA Certificates
- Companies under MAT: Certificate required in Form 66 from a chartered accountant.
- Non-corporate taxpayers under AMT: Certificate required in Form 67 from a chartered accountant.
Who Needs to Track These Changes?
- Corporate taxpayers (especially those planning to claim incentives or switch to LLPs)
- IFSC companies (due to lower MAT/AMT rates)
- Non-corporate taxpayers with adjusted income over Rs. 20 lakh
- Chartered accountants preparing statutory audit reports and tax computations
Key Dates and Takeaways
The major changes take effect from the assessment year following implementation of the Income-tax Act, 2025. Ensure your tax planning and carry-forward MAT/AMT credits are reviewed well before your next return is due—especially if you are shifting between tax regimes or business forms.
Frequently asked questions
Can companies accumulate new MAT credit after the Income-tax Act, 2025?
No, companies cannot accumulate new MAT credit under the new Act. Only MAT credit earned under the repealed 1961 Act can be carried forward, subject to certain conditions.
What happens to MAT credit if a company converts to an LLP?
Any unutilised MAT credit lapses upon conversion and cannot be carried forward or utilised by the LLP.
What are the new MAT and AMT rates under the 2025 Act?
MAT applies at 14% of book profit for most companies (9% for IFSC companies). AMT is 18.5% (9% for IFSC units, 15% for cooperative societies), plus applicable surcharge and cess.
Who is exempt from MAT or AMT under the new rules?
Specified companies and funds opting for concessional tax regimes, life insurance companies, shipping companies under tonnage tax, and some foreign companies/funds are outside MAT/AMT.
Is a CA certificate still required for MAT/AMT calculations?
Yes, companies require Form 66 for MAT, while non-corporate taxpayers under AMT need Form 67, both certified by a chartered accountant.
For how many years can AMT credit be carried forward?
AMT credit can be carried forward and set off against future regular tax liability for up to fifteen assessment years. No interest is paid on such credit.