Alternate Minimum Tax

     The existing provisions of section 115JC of the Act provide that where the regular income tax payable by a person, other than a company, for a previous year is less than the alternate minimum tax for such previous year, the person would be required to pay income tax at the rate of eighteen and one half per cent on its adjusted total income. The section further provides that the total income shall be increased by deductions claimed under Part C of Chapter VI-A and deductions claimed under section 10AA to arrive at adjusted total income.

     Under the Act, the investment linked deductions have been provided in place of profit linked deductions. These profit linked deductions are subject to alternate minimum tax (AMT). Accordingly, with a view to include the investment linked deduction claimed under section 35AD in computing adjusted total income for the purpose of calculating alternate minimum tax, it is proposed to amend the section so as to provide that total income shall be increased by the deduction claimed under section 35AD for purpose of computation of adjusted total income.The amount of depreciation allowable under section 32 shall, however, be reduced in computing the adjusted total income.

     Example:

Total income	: ₹ 60
Deduction claimed under Chapter VI-A	: ₹ 40
Deduction claimed under section 35AD on a capital asset	: ₹ 100

 

     Computation of adjusted total income for the purposes of AMT

Total income	: ₹ 60
Addition:
(i) deduction under Chapter VI-A (on non-specified business)	: ₹ 40
(ii) deduction under section 35AD (on specified business) ₹ 100 Less: depreciation under section 32 ₹ 15	: ₹ 85
Adjusted total income under section 115JC	: ₹ 185

     These amendments will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

[Clause 38]

Alternate Minimum Tax inclusion of investment linked deductions increases the AMT taxable base after reducing depreciation. The amendment requires that investment linked deductions claimed under section 35AD be added back to total income for the purpose of computing adjusted total income under the alternate minimum tax regime, while reducing allowable depreciation under section 32 in that computation, thereby altering the taxable base for AMT and applying to assessment years from 2015 16 onwards.