AMT for LLPs Under Income-tax Act 2025: Notice Triggers, Response Strategy and Penalties
Alternate Minimum Tax (AMT) trips up many LLPs and partnership firms that legitimately claim special deductions — only to find that AMT at 18.5% creates a higher tax liability than normal computation. The Income-tax Act 2025 renumbers AMT provisions from Section 115JC to Section 230, but the mechanics and rate are unchanged. This guide shows exactly when AMT applies to LLPs, how to compute adjusted total income, and how to plan around AMT.
What Is AMT and Who Does It Apply To?
Alternate Minimum Tax (AMT) is the counterpart of MAT — but for non-corporate taxpayers (individuals, HUFs, AOPs, BOIs, and LLPs). AMT under Section 206 of the new Act (old: Section 115JC) ensures that even when an LLP or individual claims deductions under Chapter VI-A or investment-linked deductions that reduce taxable income to nil, a minimum tax is still paid.
| Parameter | Old Section | New Section | AMT Rate |
|---|---|---|---|
| AMT for LLPs, Firms, Individuals, HUFs | 115JC | 230 | 18.5% of adjusted total income |
| AMT credit carry-forward | 115JD | 207 | 15 years | 15 years | ||
| Adjusted total income | 115JC(2) | 206(2) | Total income + deductions under Chapter VI-A + Sections 10AA, 35AD |
AMT Computation — Adjusted Total Income for LLPs
To compute AMT, start with the LLP's total income as computed under normal provisions, then add back:
- All deductions claimed under Chapter VI-A (Sections 80C through 80U — but only for individuals; for LLPs, mainly 80G, 80GGA, 80GGC, 80IC, 80ID, etc.)
- Deduction claimed under Section 10AA (profits of SEZ units)
- Deduction claimed under Section 35AD (investment in specified businesses — cold chain, hospitals, hotels)
AMT = 18.5% of adjusted total income (+ surcharge + health and education cess). If AMT > normal tax, pay AMT and earn AMT credit for the difference.
Case Study: Law Firm LLP Caught by AMT
Vyas & Associates LLP has 12 partners. In Tax Year 2026-27: gross professional receipts ₹8 crore, expenses ₹5.5 crore, net profit ₹2.5 crore. Partner remuneration allowed under Section 55 (new Act, old Section 40(b)): ₹2 crore. Taxable LLP income: ₹50 lakh.
The LLP also donated ₹40 lakh to a registered charitable trust under Section 90 (new, old 80G) — eligible for 50% deduction = ₹20 lakh. Normal taxable income = ₹50L − ₹20L = ₹30 lakh. Normal tax at 30% = ₹9 lakh.
AMT computation: Adjusted total income = ₹30L + ₹20L (add back 80G) = ₹50 lakh. AMT = 18.5% × ₹50L = ₹9.25 lakh. AMT (₹9.25L) > normal tax (₹9L) — LLP pays AMT of ₹9.25 lakh and gets AMT credit of ₹0.25 lakh.
AMT Credit Utilisation
AMT credit (AMT paid minus normal tax) is carried forward under Section 231 for up to 15 tax years. In any subsequent year where normal tax exceeds AMT, the accumulated AMT credit can be offset against the excess.
AMT Compliance Points for LLP Partners
- Compute adjusted total income — total income plus all add-back deductions
- Apply 18.5% to adjusted total income — compare with normal tax
- If AMT is higher, pay AMT and claim credit for excess in Form ITR-5
- Track AMT credit balance separately under Section 207 — 15-year expiry applies
- If planning 35AD deductions: model AMT impact before committing to investment
- AMT does not apply to individuals with income below ₹20 lakh — check threshold before computing