Mat is applicable only if you have a positive earnings before tax for the current financial year. It is calculated at 16.95% of your earnings before tax. You will be eligible for MAT only your calculated MAT is greater than tax provisions as per IT act. The amount you are eligible for is the difference between the calculated MAT and Tax provisions as per IT act.
You can also carry forward your MAT for up to 8 years. If you are not eligible for any MAT in the current year, you can carry forward the MAT carried forward form the last year minus the credit utilized in this year. If you are eligible for MAT in the current year you can carry forward 8 years of eligible MAT.
MAT credit that you can use for the month is minimum of carried forward MAT from previous year and tax per IT act.
MAT credit can be utilized in a current year only if calculated MAT is less than provisions for Tax by IT act for the current financial year. When you utilize the MAT credit, you pay a tax of only (tax per IT – MAT).
Huh! Crazy!
First, I can’t think of a situation where MAT can be greater than regular tax. Both are percentages of earnings before tax! None of the explanations on the internet satisfied me. So I looked up this model, based on which I have put this gibberish up here. Take a look for yourselves and let me know if you can describe MAT better for a layman.
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