Income Tax

Old MAT Computation vs New MAT Provisions for Companies 2025

By CA Nikhil GuptaUpdated June 2026New Act

Reviewed by CA Nikhil Gupta · Last reviewed 26 September 2026

Corrected 26 September 2026: the earlier version pointed MAT credit and the concessional-regime exemptions to the wrong sections (208, 209, 223), described an exempt-income item that no longer exists, and misdescribed LLPs. Section 206 and Sections 200 and 201 are the correct references.

Official sources cited: Income-tax Act 2025, Sections 199–201 and 206 | old Sections 115JB, 115JAA and 115JC of the 1961 Act | incometax.gov.in

Minimum Alternate Tax (MAT) makes sure a company that shows book profit pays some tax even when its taxable income under the normal rules is low. Section 206 of the Income-tax Act 2025 (old Section 115JB) keeps MAT at 15% of book profit and places the MAT credit rule and the alternate minimum tax for non-company persons in the same section. This guide shows what carries over, what is excluded, how MAT credit works, and what changed in the section references.

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MAT — Old Act (Section 115JB) vs New Act (Section 206)

MAT applies when a company's tax under the normal provisions is less than 15% of its book profit; the company then pays tax on the book profit instead.

Parameter	Old Act (Section 115JB / 115JAA)	New Act (Section 206)
Section	115JB (MAT), 115JAA (MAT credit), 115JC (AMT)	206 — MAT, MAT credit and AMT together
Rate	15% of book profit	15% of book profit
Effective rate with surcharge and 4% cess (domestic company)	About 15.6% up to ₹1 crore of income; 16.69% with 7% surcharge (₹1–10 crore); 17.47% with 12% surcharge (above ₹10 crore)
MAT credit	Carried forward for 15 years	Carried forward and set off in a year when tax on the total income exceeds MAT; not beyond the 15th tax year after the year in which the credit became allowable
Not covered	Life insurance business; companies that opted for Section 115BAA or 115BAB	Life insurance business; companies that exercised the option under Section 200(5) or Section 201(2)
Non-company persons	Alternate minimum tax under Section 115JC — 18.5%	Alternate minimum tax under Section 206 — 18.5% of adjusted total income where regular tax is lower; not applicable below ₹20 lakh, or where the option in Section 203(5) or 204(2) was exercised

ℹ️

LLPs are outside MAT: MAT is a company tax. An LLP or other non-company person is subject to alternate minimum tax (18.5% of adjusted total income where the regular tax is lower), and only if adjusted total income is ₹20 lakh or more.

Book Profit Computation — Typical Adjustments

Book profit starts from the net profit in the profit and loss account and is adjusted as the Explanation to the section requires. The items below carry over from the Explanation to old Section 115JB; read each against the Explanation to Section 206 before use.

Typical additions to net profit:

Income-tax paid or payable and its provision, including deferred tax
Amounts carried to reserves (other than those the section permits)
Provisions for unascertained liabilities
Dividends paid or proposed, if debited to the profit and loss account
Expenditure relating to income that is exempt

Typical deductions from net profit:

Amounts withdrawn from reserves and credited to the profit and loss account, where they were not treated as book profit earlier
Depreciation charged on revaluation, to the extent it was debited to the profit and loss account
Brought-forward loss or unabsorbed depreciation, whichever is less
Income that is exempt and credited to the profit and loss account

ℹ️

MAT credit: when a company pays MAT because normal tax is lower, the excess of MAT over normal tax becomes a credit. It can be carried forward and set off in a later year in which the tax on the total income exceeds MAT — but only up to that excess — and not beyond the 15th tax year after the year in which it became allowable (Section 206). Track the balance year by year in the return's MAT schedule.

Illustration: Infrastructure Company With a ₹45 Lakh MAT Credit

Hypothetical figures — a construction company using accelerated depreciation

For four consecutive years the company reports high book profit but low taxable profit because of accelerated depreciation on equipment. MAT at 15% exceeds normal tax each year, and a MAT credit of ₹45 lakh builds up.

MAT credit accumulated

₹45 lakh

Fifth year: normal tax / MAT

₹48 lakh / ₹12 lakh

In the fifth year the equipment is fully depreciated and normal tax of ₹48 lakh exceeds MAT of ₹12 lakh. The credit that can be set off is limited to the excess of normal tax over MAT: ₹48 lakh − ₹12 lakh = ₹36 lakh. The company pays ₹12 lakh and carries forward the remaining ₹9 lakh of credit.

Lesson: MAT credit is a deferral, not a refund. Set-off is capped each year, so a large balance can take several years to use — and the 15-year window runs from the year each credit arose.

Companies Not Subject to MAT

Companies that exercised the option for the concessional 22% rate under Section 200(5) (old Section 115BAA) — no MAT, but the concessional rate comes with restrictions on exemptions and deductions
New manufacturing companies that exercised the option under Section 201(2) (old Section 115BAB) — concessional 15% rate
Companies with income from life insurance business, which are taxed under a separate regime

MAT Compliance Checklist

Compute book profit under Section 206 and reconcile it with the net profit in the accounts
Compare 15% of book profit with tax under the normal provisions; the higher amount is payable
If MAT is paid, work out the MAT credit for the year and add it to the carried-forward balance
Track each year's credit against the 15-year limit and use it in years when normal tax exceeds MAT
Before opting for the concessional regime (Section 200(5) or 201(2)), model the tax and the loss of MAT credit — under the old Act the option, once exercised, could not be withdrawn; check the current wording of the section
Keep deferred-tax accounting accurate, because it feeds into book profit

Frequently Asked Questions

Section 206 of the Income-tax Act 2025 charges MAT at 15% of book profit — the same as old Section 115JB — where the tax on the total income under the normal provisions is less. With surcharge and 4% health and education cess, a domestic company pays about 15.6% (income up to ₹1 crore), 16.69% (₹1–10 crore, 7% surcharge) or 17.47% (above ₹10 crore, 12% surcharge). Companies that exercised the option under Section 200(5) or 201(2), and life insurance companies, are not covered.

Under Section 206 (old Section 115JAA), MAT credit can be carried forward and set off in a year in which the tax on the total income exceeds MAT, but not beyond the fifteenth tax year immediately after the tax year in which the credit became allowable. The set-off in any year is limited to the excess of normal tax over MAT.

No. MAT applies to companies. A person other than a company, including an LLP, is subject to alternate minimum tax under Section 206 — 18.5% of adjusted total income where the regular income-tax is lower — and it does not apply where adjusted total income is below ₹20 lakh.

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