It is a tax imposed on companies, which escaped corporate tax net or pay very low tax by using the provisions of exemptions, deductions, and incentives etc., which are called Zero Tax Companies.
It was introduced in 1996 – 97.
In case, total income of the company after availing all eligible deductions is less than
30% of the book profits, the company shall be charged to a minimum tax as a percentage of total income. This is to ensure that companies pay at least a minimum amount of tax.
It is applicable on all companies except those engaged in infrastructure and power sectors, free trade zones, charitable activities, and venture and angel funds.
Foreign companies with income sources in India also come under it.
The Union Budget 2016-17 has rationalized the MAT provisions for the FIIs (Foreign Financial Institutions)-now they do not need to pay MAT on their profits from capital gains on transactions in securities (which are liable lower tax rate).
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