Finance (No. 2) Act, 1996--Explanatory Notes on provisions relating to Direct Taxes--Introduction

Minimum alternate tax introduced to ensure companies with substantial book profits pay minimum tax alongside expanded tax incentives.

The Act revises income-tax and TDS rates, introduces a Minimum Alternate Tax on companies by deeming a portion of book profits taxable where normal taxable income is lower, and expands sectoral exemptions, tax holidays and targeted deductions (including for pension funds, infrastructure funds, R&D companies, medical expenses and donations). It clarifies depreciation for fractional ownership, tightens rules on sale-and-reacquisition for depreciation, broadens TDS credit for jointly owned income, raises thresholds for advance tax and TDS, and amends procedural time limits and registration requirements for charitable trusts and wealth-tax asset definitions.