Alternative Minimum Tax (AMT) is a special tax provision in India designed to ensure that taxpayers, especially companies and limited liability partnerships (LLPs), who claim various deductions and exemptions under the Income Tax Act, still pay a minimum amount of tax to the government.
Under the regular income tax system, businesses can reduce their taxable income significantly by using deductions like those under Section 10AA (for SEZ units), Section 35AD (capital expenditure for specified businesses), or Section 80-IA to 80RRB (various tax-saving sections). In some cases, these deductions could bring the tax liability down to a very low amount or even zero. AMT was introduced to counter this and maintain a fair tax base.
If the regular tax payable by a taxpayer is less than the AMT calculated, then they must pay tax as per the AMT provisions. As of now, the AMT rate is 18.5% (plus applicable surcharge and cess) on the "adjusted total income." This adjusted income is calculated by adding back the deductions claimed under certain sections.
AMT mainly applies to:
- LLPs claiming deductions under Chapter VI-A or Section 10AA.
- Individuals, HUFs, AOPs, and BOIs (if their adjusted total income exceeds ₹20 lakhs and they’ve claimed specified deductions).
AMT is relevant for business owners during income tax filing, especially if they operate through LLPs or claim significant deductions. Being aware of AMT helps in accurate tax planning and avoids unexpected tax liabilities during assessments or filings.
To stay compliant and plan taxes effectively, it's essential to calculate both regular income tax and AMT when deductions are claimed. You can explore professional tax solutions and filing support at FinTax24 to manage AMT and other income tax obligations smoothly.