Nitty-gritty of Alternate Minimum Tax (AMT)

Normally, you have to pay the tax as per the normal provisions of Income-Tax Act, 1961. However, in some special cases, you have to pay some extra tax due to some specific provisions of Income Tax Law. AMT can be termed as an extra tax levied by the government.

For assessees, who are claiming profit linked deductions (i.e. deductions under section 80IA to 80RRB except 80P like income from infrastructure projects, royalty income, other eligible business incomes etc.), AMT provisions have been made applicable through which, AMT will be payable if normal tax computed on their taxable income is less than AMT.

Thus, Assessees whose Taxable Income comprises of Income from Salary, House Property, Capital Gains, Income from Other Sources and Business and Profession income (except income whose deduction is admissible under section 80IA to 80RRB)

shall not be liable to pay tax as per AMT in any case.

Thus, a person having only salary income will never be liable to AMT.

Applicability

• Applicable to all Assesses except Companies (So AMT is applicable on Individuals, Partnership Firms, AOPs, BOIs & Trust); but applicable only if a person has claimed deduction under section 80-IA to 80-RRB or under section 10AA or 35AD.
• AMT is applicable only if Adjusted Total Income of person is more than Rs. 20 lakhs.

Tax rate applicable in AMT – 19.055% (18.5% tax + 3% EC & SHEC) on

Adjusted Total Income; surcharge @ 12% is also payable if Adjusted Total Income exceeds Rs. 1 crore.

How shall Adjusted Total Income be computed?

Tax credit of AMT
AMT paid in excess of the regular income tax computed on taxable income under normal provisions can be adjusted against future tax liability in the year in which tax payable as per normal provisions is more than AMT. The credit will be available for a period of ten years succeeding the year in which credit becomes available.

Illustration 1:
Income from Salary Rs. 20 Lakhs
Income from Business Profession (no income subject to deduction under section 80IA to 80RRB) Rs. 10 Lakhs

Deductions under chapter VI-A Rs. 5 Lakhs
Here taxable income shall be Income from salary + Income from Business & Profession Deduction under Chapter VIA = 20 + 10 5 = Rs. 25 Lakhs
Here AMT shall not be applicable since assessee has not claimed any deduction under Sec 80IA to 80RRB/ Section 35AD/ Section 10AA.

Illustration 2:
Income in respect of royalty received on patents Rs. 16 Lacs. and
Income in respect of royalty received on books Rs. 13 Lacs.
Tax payable as per Normal provisions:

Tax payable as per AMT provisions:

Since AMT is more than normal tax, hence AMT shall be payable by the assessee and the excess of AMT paid i.e. 5, 52,595 - 5, 30,450 = 22,145 can be availed as AMT credit in future when the regular tax is more than AMT.

So, if you are not earning profits from infrastructure projects, patent/royalty income, and other income as mentioned in 80IA to 80RRB, then don't worry; just pay the normal tax on normal taxable income and stay calm!