Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: list of goods taxed at 4% :: due date for vat payment :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: VAT Audit :: articles on VAT and GST in India :: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: form 3cd
« General »
 Why consumers should welcome GST
 Retailers need to file single GST return every month
 Aadhaar is must for income tax returns if you have one; Here's how you can file it online
 Will it be a tax haven above the law?
 Your mutual fund investment tax efficient? Here are 3 steps to ensure utmost efficiency for your portfolio
 Finally a goods and services tax. But what lies ahead?
 Tax May Rise On Outbound M&As, Indian Mncs’ Investments
 Filing income tax return? Do remember to claim benefits on your reimbursements
 Banks will have a hard slog ahead to get GST-ready
 Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956
 Introduce indemnity clauses with suppliers on tax compliance: Expert

Corporate tax exemptions phase-out may end MAT
September, 22nd 2015

The Minimum Alternate Tax (MAT) could be phased out after some years, if and when all corporate tax exemptions and deductions are phased out.

This could take at least seven or eight years. If it happens, experts agree, it would reduce tax litigation.

A finance ministry official said MAT might become redundant in seven years or more and could be removed. "For now, it will remain in the Income Tax Act, even if it does not affect people. If there are no substantial deductions that reduce the income to below 18.5 per cent, MAT will not be applicable. In seven to 10 years, as MAT becomes redundant, it will be removed," he said.

1987-88: Rajiv Gandhi introduces Section 115J in I-T Act to tax zero tax companies at at least 15% of book profits

1990-91: Madhu Dhandvate Abolishes it

1996-97: P Chidambaram re-introduces section 115 JA. MAT rate at 12.5% of total book profit.

2000-01: Yashwant Sinha amends and makes it 115 JB. Rate at 7.5%. Continues even today. Simplifies rules

2006-07: 7.5%, but long capital gains taken into account to compute book profit

2009-10: 10%

2010-11: 15%

2011-12: 18%

2012-13: 18.5%

2013-14: 18.5%

2014-15: 18.5%

2015-16: 18.5%

The government is also looking at setting a sunset date for most open-ended tax concession schemes, alongside a five percentage point reduction in the corporate tax rate in four years. The rate is 30 per cent, but is close to 23 per cent, on account of a large number of exemptions and deductions. The revenue forgone in 2012-13 on account of deductions in this regard was Rs 68,000 crore.

In the next financial year, the corporate tax rate might be around 29 per cent, after a cut, part of a plan to align Indian taxation levels to global standards. "As the government progressively reduces the rate to 25 per cent and phases out exemptions and deductions, the need for MAT goes away. It will simplify a lot of things," said Sudhir Kapadia, national tax leader, EY.

The finance ministry will issue a discussion paper on phasing out the exemptions and deductions. It is likely to announce the road map in the Budget.

MAT is levied at 18.5 per cent and was meant for large companies that showed book profits but took advantage of legal provisions to avoid paying corporate tax, via dividend payments and other legal deductions to stated income. As of now, 38 corporate tax deductions apply to industry, including benefits for units set up in Special Economic Zones (SEZs), the northeast states, hilly states and so on. Besides, tax incentives are offered for expenditure on scientific research, funding charitable trusts and institutions and the like. Deductions are also offered to sectors such as power, telecommunications, and infrastructure.

"As the corporate tax rate is reduced to 25 per cent, MAT will also not make sense, as the two rates anyway come close," said Rajesh H Gandhi, partner, Deloitte Haskin and Sells.

Rahul Garg, leader, direct taxes, PwC, said the government should look at replacing corporate tax with MAT. The effective corporate tax was 23.4 per cent, he explained, while that of MAT was close to 22 per cent. "If the government simply increases the MAT rate by one percentage point, collections will go up. With this, the government could get rid of all disputes," he said.

SEZs lost sheen after then finance minister Pranab Mukherjee in 2011-12 imposed MAT on the book profits of these developers and units inside one.

That and a dividend distribution tax of 10 per cent made these enclaves unattractive. Only 192 of the 388 notified SEZs are operational, meaning at least one functional export unit. There are 588 approved SEZs.

Exports from SEZs fell 7.6 per cent in 2014-15. The department of commerce has been pressing the finance ministry for the withdrawal of MAT but the latter has not obliged. The Budget for 2015-16 has exempted foreign portfolio investment from MAT and the government has also accepted the A P Shah panel recommendation to do away with past cases of MAT on foreign institutional investors. A change to the law is on its way, while tax officials have been instructed not to pursue notices, issued against foreign instituional investors. However, applicability of MAT on foreign companies without permanent establishment remains. A case relating to this involving Castleton Investments is pending in the Supreme Court.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions