MAT vs AMT: Which Applies to You

A note on the law: section numbers here are from the Income tax Act, 1961, the operative law for the current filing cycle. Under the Income tax Act, 2025, from Tax Year 2026-27, both regimes sit in a single provision, Section 206: MAT in sub-section (1) and AMT in sub-section (2). This article is for general information and does not constitute tax advice.

MAT: for companies on the regular regime

Section 115JB requires a company to pay 15% of book profit, computed from its financial statements with specific adjustments, whenever that figure exceeds tax computed normally. Under Section 206(1) of the 2025 Act the rate is 14%, a genuine rate cut rather than a renumbering. A company that is an IFSC unit deriving income solely in convertible foreign exchange pays 9%. The company pays whichever is higher, MAT or regular tax, and a CA-certified report in Form 29B is mandatory wherever MAT applies.

Companies that have opted for Section 115BAA (22%) or 115BAB (15%, new manufacturing) sit outside MAT entirely. This section concerns companies still on the regular 25%/30% regime.

The rate cut came at a price: MAT credit is gone

Under the 1961 Act, excess MAT paid over regular tax became MAT credit, carried forward fifteen years and set off in a later year when regular tax exceeded MAT. The Income tax Act, 2025 carries no equivalent. The credit clauses of Section 206(1) stand omitted, and nothing replaces them. For a company remaining on the regular regime from Tax Year 2026-27, MAT paid at 14% is a final cost, with nothing to carry forward against a better year.

This changes the character of MAT completely. It used to be a timing difference, money paid early and recovered later. It is now an absolute one. Any modelling that treated a MAT year as a cash-flow event rather than a permanent cost needs redoing, and the case for a regularly-MAT-paying company to opt into the concessional regime is materially stronger than it was.

Credit already accumulated: two defined survivors

Sub-sections (3) and (4) of Section 206 deal exclusively with credit standing under Section 115JAA of the 1961 Act as at 31 March 2026, and with nothing arising after it:

• A domestic company that has opted into Section 200 or 201 (115BAA and 115BAB’s equivalents) may set that legacy credit off against up to 25% of the tax payable for the year, carrying the balance forward, but not beyond the fifteenth tax year after the credit first became allowable.
• A foreign company may carry it forward and set it off in a year where normal tax exceeds MAT, limited to that difference, under the same fifteen-year outer limit.

For anyone switching regimes this is an improvement on the old position. Under CBDT Circular 29/2019, exercising the 115BAA option wiped out accumulated MAT credit immediately and permanently. A company weighing the switch no longer chooses between the lower rate and its credit balance; it keeps both, just at a slower pace of use. One carve-out: on conversion of a private or unlisted public company into an LLP, the successor LLP does not inherit this treatment.

AMT: for everyone else, but only sometimes

Section 115JC applies the same logic to LLPs, firms, individuals and HUFs, but only where specific deductions have been claimed: Chapter VI-A profit-linked incentives, Section 35AD, or Section 10AA. No qualifying claim, no AMT, regardless of income size. The rate is not uniform:

Assessee	AMT rate on adjusted total income
Unit in an IFSC, income solely in convertible foreign exchange	9%
Co-operative society	15%
Any other case	18.5%

Who is outside AMT altogether. A person whose tax is computed under the default individual regime is outside it. So is an individual, HUF, AOP, BOI or artificial juridical person whose adjusted total income does not exceed 20 lakh rupees, and so is a specified fund. LLPs and firms get no such floor at all, which is the asymmetry that catches professional firms out.

The asymmetry: AMT credit survives, MAT credit does not

This is the single most consequential point on this page, and it is easy to miss because both regimes now live in the same section. AMT keeps its credit mechanism in full. Excess AMT over regular tax becomes credit, carried forward and set off in a year when regular tax exceeds AMT, to the extent of that excess, for up to fifteen tax years. No interest accrues on it, and where foreign tax credit allowed against AMT exceeds what would have been admissible against regular tax, the excess is ignored in computing the credit.

So from Tax Year 2026-27 an LLP paying AMT is in a materially better position than a company paying MAT on comparable facts: one recovers the minimum tax through credit, the other does not. For a business choosing a structure, or a firm weighing incorporation, that is a real point of difference rather than a technicality.

One distinction that holds regardless: ordinary brought-forward business loss and normal unabsorbed depreciation survive a switch to 115BAA either way. It is specifically unabsorbed depreciation tied to the additional-depreciation claim under Section 32(1)(iia) that is forfeited, not depreciation generally.