Book profit computation 115jb of the income tax act

The finance act, 2017 notified on 31 march 2017, has introduced a separate formula for computation of book profit for the entities that prepare financial statements under indian accounting standards ind as. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. Expenditure incurred to earn exempt income computed us. However, for computing the eligible amount for the succeeding year, the taxpayer has adjusted inr 25 against. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the incometax act for ind as compliant. Under existing rules, book profit is calculated as per section 115jb of the income tax act, 1961. Calculation of mat credit applicability of minimum. Additions to the net profit if debited to the profit and loss account. Mat provisions require book profit off to the lower number. Income tax computed according to section 115jb of the act. Capital receipts and book profits mat no longer a self. In sub section 1 to sec 115jb, a word book profit is used for calculation of tax liability of the company. Under the provisions of section 115jb of the incometax act, 1961 the act, where in the case of a company, the incometax payable on the total income in respect of any assessment year ay, is less.

Cbdt circular of clarifications faqs on computation of s. Cbdt issues faqs on computation of book profit for levy of mat and proposes amendment to section 115jb of the incometax act. Cbdt issues faqs on computation of book profit for levy of. This is not so in computation of book profit under the companies act. Minimum alternate taxsection 115jbhow to compute arthikdisha. Understanding the concept of liability to pay minimum alternate taxmat and alternate minimum tax amt and various provisions like book profit, dividends paid or proposed, depreciation, deferred tax, income of foreign company, etc. Calculation of book profits for the purpose of mat. Additionally, to have parity between the transition adjustment and ongoing adjustments on account of items adjusted to other equity, the committee has recommended amendment to section 115jb2a of the incometax act the act w. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies.

Tax liability as per the mat provisions are given in sec 115jb18. The minimum alternate tax mat on companies challenges and way forward 09. Faqs on computation of book profit to levy mat for ind as. Income tax computed as per normal provisions of income tax act. This books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. Computation of book profit us 115jb tax management india. Kolkata itat recently held that the expenditure incurred to earn exempt income computed under section 14a of the income tax act could not be added while computing book profit under section 115jb of the act. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation. The finance act 2017 amended section 115jb of income tax act, 1961 to rationalise the calculation of book profits for companies that prepare their financial statements in accordance with companies indian accounting standards rules, 2015 hereinafter referred to as ind as compliant companies. Profit as per profit and loss account in the current year. The minimum alternate tax mat on companies challenges. Computation of book profits would be calculated as under a stepi.

Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Income tax computed as per provision of section 115jb of income tax act. Computation of book profit under sec 115jb income tax forum. Cbdt circular on section 115jb of the incometax act, 1961. Capital gains exempt under section 54ec need not be. Minimum alternate tax mat section 115jb income tax. Mat book profit computation 115jb for ind as compliant. Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company. Government of india ministry of finance department of revenue central board of direct taxes. The purpose of section 115jb for mat is not the tax talk. Calculation of book profits for the purpose of mat section 115jb. The matter was considered by the board and the following clarifications are issued.

Claimed as per accounts and under 115jb from year 1 to year 3. Faq on mat computation for ind as compliant companies. As per ind as, the amount of proposed dividend including dividend distribution taxes is required to be recognized in the year in which it has been declared rather than the year for which it pertains to. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. Cbdt notifies rules for computation of interest income. Section 115jb along with the return of income filed under section 9 1 of the act or along with the return of income furnished in response to a notice under section 142 1 i of the act. Mat computation of book profit us 115jb doubtful debts since, we. Special provision for payment of tax by certain companies. Book profit of the company computed as per the provisions of section 115jb is rs. As per section 115jb, every taxpayer being a company is liable to pay mat, if the incometax including surcharge and cess payable on the total income, computed as per the provisions of the incometax act in respect of any year is less than 18. By virtue of clause iic in explanation to section 115jb by the finance act, 2015 share of profit received from aop could not be added while computing book profit under section 115jb.

Profit from sale of agricultural land is not book profit. Minimum alternate tax mat us 115jb of income tax act, 1961. Ao while computing book profit under section 115jb made addition of. The provisions of subsection 5 of section 115jb open the assessment to the application of all other provisions contained in the income tax act except if specifically barred by that section itself. Clarifications on computation of book profit for the purpose of levy of. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies.

On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Consequently, the finance act, 2017, has amended the provisions of section 115jb of the incometax act, 1961 the act w. Government of india ministry of finance central board of. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the incometax act for indian accounting standards ind as compliant companies cbdt circular no. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. Provision of mat minimum alternate tax for payment of tax by certain companies section 115jb calculation of book profits for the purpose of mat section 115jb tax credit in respect of tax paid on deemed income under mat provisions section 115jaa amounts expressively allowed as deduction section 30 to 37 section 40a of income tax act. The levy of tax is on the book profits after effecting various upward and downward adjustments as set out in terms of the explanation thereto. Therefore, even clause f of explanation to section 115jb which refers to those amounts which are debited to the profit and loss account, alone can be added to the book. Faqs on minimum alternate tax mat relating to ind as. Calculation of mat credit applicability of minimum alternate tax. Cbdt amends the report on computation of book profits for. Guide to minimum alternate tax mat for ind as compliant. Whether the profit arising on transfer of development rights to the fully owned subsidiary company is required to be included in the book profit under section 115jb of the income tax act, 1961the act. Minimum alternative tax is payable under the income tax act.

Income tax 932020 mat computation of book profit us 115jb doubtful debts since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the book profits under section 115jb are not required to be reduced. The committee submitted two interim reports in year 2016 which were placed before stakeholders for. Cbdt issues faqs on computation of book profit for. Longterm employees benefits deductible while computing. For computation of book profit, one may proceed as follows. Central board of direct taxes cbdt constituted mat ind as committee to suggest framework for computation of book profit for purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter the following are brief extracts based on the. Income tax computed according to the usual provisions of the income tax act. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. In a recent ruling1 of the ahmedabad bench of the incometax appellate tribunal tribunal, an issue relating to determining the quantum of brought forward unabsorbed loss and unabsorbed depreciation eligible for reduction from the profits in the tax computation under section 115jb of the incometax act, 1961 the act has come up. The revised section 115jb of the incometax act, 1961 the act prescribes that. The taxpayer reduced inr 25 being lower of unabsorbed loss and unabsorbed depreciation in the tax computation under section 115jb of the act. Clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies.

While computing the book profits under the provisions of section 115jb of the incometax act, 1961 the act, disallowance under section 14a of the act has been a topic of debate since its inception with reference to increasing the book profit by such disallowance. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. It is a special provision, whereby, if the tax payable on the total income of a company, computed as per the normal provisions of the act is less than 18. Dear friends, under section 115jb of it act 1961, in order to compute book profit, the following is to be reduced from profitloss as per companies act 20. Section 115jb of the act already provides for adjustments for dividend for computation of book profit. This explanation provides that book profit is nothing but is calculated. Section 115jb of the act already provides for adjustments for dividend for computation of book profit as per ind as, the amount of proposed dividend including dividend distribution taxes is required to be recognized in the year in which it has been declared rather than the year for which it pertains to. According to the learned department representative, the book profit as referred us 115jb shall be computed irrespective of the fact that whether particular receipt is taxable under normal provisions of the income tax act or not, hence there is no question of deduction of sales tax subsidy, being capital receipt from book profit. Income tax paid or payable if any calculated as per normal provisions of income tax act. The procedure for the computation of book profit as per. Book profit is defined in section 115jb of the act. Taxable income as per normal provision of income tax act. In india, when applied to companies, amt is termed the minimum alternate tax.