Minimum Alternative Tax (MAT)

• Any corporate or firm that is there pays corporate tax and several other taxes. Any tax for it to be matter is paid on the overall income of the company for which the threshold amount is fixed by the government.
• Even though the threshold limit on increasing which the tax is entitled is paid by the government it is upon the company to show the actual income or the manipulated income.
• The tax is normally not charged on the cost but basically on the book profit. Every company that exists shall prepare profit and loss account and the amount that is calculated when the revenue is more than the expenditure the outcome is book profit. Earlier the tax was not directly charged on the book profit but the tax was charged on the amount of income that is left after reducing several exemptions, depreciation that was granted by the government.
• Many firms started to misuse this tax provision of the government and many zero tax companies started budding.
• These zero tax companies used to drastically manipulate the depreciation charges and show a huge depreciation amount to the company that is generally not occurred. And it's very difficult for the government to find out the actual depreciation amount.
• Several companies transact and evaluating the transaction of every company by the government is not an easy tax at all.
• So now the government started imposing the tax directly on the book profit. If we look into the black money that is generated then the amount is so high that non of the government schemes can change the rate of the black money.
• Every company has its tax officials appointed and its chartered accountants so the preparation of the financial statement of the company is in the hands of the chartered accountant and finding loopholes in the taxation system is in the hands of the tax officials. But despite this situation the tax the new taxation system of MAT has helped the tax flow into the government's fund to a very good level.