| For
the Assessment Year 2007-08 |
The scope has
been widened. Income eligible for tax holiday under sections 10A and
10B has been included:
- In the Budget this year, it has been announced that the
income eligible for tax holiday under sections 10A and 10B
henceforth will be considered in the computation of ‘book
profits’ for the levy of MAT.
|
 |
|
Normally, a comapny is liable to pay tax on the income computed in
accordance with the provisions of the income tax Act, but the profit and
loss account of the company is prepared as per provisions of the
Companies Act. There were large number of companies who had book profits
as per their profit and loss account but were not paying any tax because
income computed as per provisions of the income tax act was either nil
or negative or insignificant. In such case, although the companies were
showing book profits and declaring dividends to the shareholders, they
were not paying any income tax. These companies are popularly known as
Zero Tax companies. Inorder to bring such companies under the income tax
act net, section 115JA was introduced w.e.f assessment year 1997-98.
According to this section, if the taxable income of a company computed
under this Act, in respect of previous year 1996-97 and onwards is less
than 30 % of its book profits, the total income of such company is
chargeable to tax for the relevant previous year shall be deemed to an
amount equal to 30 % of such book profits.
A new tax credit scheme is introduced by which MAT paid can be carried
forward for set-off against regular tax payable during the subsequent
five year period subject to certain conditions, as under:-
- When a company pays tax under MAT, the tax credit earned by it
shall be an amount which is the difference between the amount
payable under MAT and the regular tax. Tegular tax in this case
means the tax payable on the basis of normal computation of total
income of the company.
- MAT credit will be allowed carry forward facility for a period of
five assessment years immediately succeeding the assessment year in
which MAT is paid. Unabsorbed MAT credit will be allowed to be
accumulated subject to the five year carry forward limit.
- In the assessment year when regular tax becomes payable, the
difference between the regular tax and the tax computed under MAT
for that year will be set off against the MAT credit available.
- The credit allowed will not bear any interest.
