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Alternative Minimum Tax (AMT) for Non-Companies

Section 115JC was introduced under Chapter XII-BA of the Income-tax Act, 1961, as part of the Alternative Minimum Tax (AMT) provisions.

While Minimum Alternate Tax (MAT) applies to companies, AMT applies to non-corporate taxpayers (such as individuals, HUFs, firms, LLPs, AOPs, BOIs, and artificial juridical persons) who claim certain profit-linked or investment-linked deductions.

This section ensures that such taxpayers pay a minimum level of tax even if their income is reduced due to exemptions or deductions.

Who is Covered?

  • Persons other than companies (such as partnership firms, Limited Liability Partnerships (LLPs), individuals, Hindu Undivided Families (HUFs), Association of Persons (AOPs)) who claim deductions under specified provisions like Section 10AA (Special Economic Zone units) and Chapter VI-A deductions (except section 80P).
  • Entities taking benefit of deductions under sections like 35AD (investment-linked deductions).
  • Entities with adjusted total income exceeding Rs. 20 lakh (threshold may vary slightly based on latest rules).

Core Provision of Section 115JC

  • If the regular income-tax payable (calculated as per normal provisions of the Act) is less than the Alternative Minimum Tax (AMT), then the taxpayer must pay AMT.

Tax Rate under AMT

  • AMT = 18.5% of Adjusted Total Income.
  • In the case of unit located in International Financial Services Centre (IFSC) earning income solely in convertible foreign exchange → AMT rate = 9%.

Computation of AMT

The following steps outline how AMT is computed:

  1. Calculate the Adjusted Total Income by adding back specified deductions to the normal taxable income.
  2. Compute AMT as 18.5% of the adjusted total income.
  3. Compare the AMT liability with the regular income tax liability calculated under normal provisions.
  4. The taxpayer pays the higher of the two (either normal tax or AMT).

For example, if regular tax payable is Rs. 1,50,000 but AMT computed is Rs. 2,00,000, the taxpayer must pay Rs. 2,00,000.

Certification Requirement

Taxpayers to whom Section 115JC applies are required to obtain a report in Form No. 29C from a certificate from a Chartered Accountant certifying the correctness of the computation of adjusted total income and AMT. This certificate must be filed along with the income tax return to claim compliance.

Important Exemptions and Thresholds

  • Individuals, HUFs, or other non-company entities with adjusted total income below Rs. 20 lakh are generally exempt from AMT.
  • Taxpayers covered under concessional tax frameworks such as sections 115BAA, 115BAB, 115BAC (new regime), 115BAD, and 115BAE are exempt from AMT.
  • Loss-making entities claiming specified deductions are still liable to pay AMT.
  • LLPs do not enjoy exemption based on the Rs. 20 lakh threshold for AMT applicability and must comply regardless of income level.

Surcharge and Health & Education Cess

  • Surcharge on AMT is applicable as per income thresholds, similar to normal tax rates. For example, income above Rs. 50 lakh attracts 10% surcharge, income above Rs. 1 crore attracts 15%, and higher slabs attract higher surcharges up to 37%.
  • Health and Education Cess at 4% is also applicable on the AMT (including surcharge).

 

Example

Suppose an LLP has:

  • Regular taxable income = ₹10,00,000
  • Deduction under section 35AD = ₹40,00,000
  • Deduction allowable depreciation (Sec. 32) = ₹5,00,000

Adjusted Total Income (ATI) = 10,00,000 + 40,00,000 – 5,00,000 = ₹45,00,000

  • Regular Tax = ₹10,00,000 × 30% = ₹3,00,000
  • AMT = ₹45,00,000 × 18.5% = ₹8,32,500

Since AMT > Regular Tax, the LLP must pay ₹8,32,500 as tax. The excess ₹5,32,500 can be carried forward as AMT credit.

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