MAT (Minimum Alternate Tax)

MAT (Minimum Alternate Tax) is a provision under Section 115JB of the Income Tax Act that ensures companies pay a minimum level of tax even when their normal tax liability is reduced to zero by deductions, exemptions, and brought-forward losses. The rate is 15% of book profits (plus applicable surcharge and cess), where book profits are computed from the profit and loss account with specific adjustments — not from taxable income.

Who it applies to

• All companies incorporated in India (private limited, public limited, OPCs)
• Applies in any year where MAT liability (15% of book profits) exceeds normal tax liability
• Does not apply to LLPs — they face Alternate Minimum Tax (AMT) at 18.5% under Section 115JC
• DPIIT-recognised startups with IMB approval get specific MAT relief for the years they claim Section 80-IAC

What you get

If your startup has significant Section 80-IAC deductions that reduce normal tax to zero, you might still face MAT on your book profits. However, Section 115JB(6) provides that for companies with IMB-approved 80-IAC status, the 80-IAC deduction is also deducted from book profits before computing MAT. This means the MAT liability during your 80-IAC years is typically nil alongside your normal tax liability — the benefit works in both computations.

Any MAT paid in excess of normal tax generates MAT credit, which can be carried forward for 15 years and offset against future years when normal tax exceeds MAT.

What most founders miss

MAT and normal income tax are computed separately. A startup that reduces its normal tax liability to zero through 80-IAC but then ignores MAT is making a filing error. Even if the 115JB(6) relief reduces MAT to nil, the computation must be performed and documented in the tax return.

LLPs are not subject to MAT — they face AMT. A startup structured as an LLP claiming 80-IAC should model its AMT exposure under Section 115JC, which has a different relief mechanism. Many LLP founders mistakenly assume MAT does not apply to them (correct) and then fail to analyse AMT (incorrect).

MAT credit is real money. Companies that have paid MAT in earlier years can recover it by offsetting against normal tax in later profitable years. Track MAT credit carefully — it can be a meaningful balance sheet asset.

See also

• Section 80-IAC — the profit holiday that interacts with MAT under Section 115JB(6)
• Eligible Startup — the status required to access the 115JB(6) MAT relief
• Inter-Ministerial Board (IMB) — the body whose approval triggers both 80-IAC and MAT relief