Consider the following statements regarding the Minimum Alternate Tax (MAT) in Indian tax regime.
1. MAT is calculated at 15% on the book profit or at the usual corporate rates, and whichever is lower is payable as tax.
2. Only domestic companies in India fall under this provision.
3. MAT is an important tool with which tax avoidance can be prevented.
Which of the statements given above is/are correct?​

Correct option is A

The correct answer is (a) Only 3

Explanation:

• Statement 1: Incorrect
  MAT is not paid at the lower of the two values. Instead, companies are required to pay whichever is higher:
• Tax under normal provisions
• MAT at 15% of book profit (plus cess and surcharge)
• Statement 2: Incorrect
  MAT applies to both domestic and foreign companies operating in India, unless specifically exempted, such as units under Section 10AA (SEZs).
• Statement 3: Correct
  MAT is designed to prevent tax avoidance by ensuring companies that report high book profits but use deductions to reduce taxable income still pay a minimum level of tax.

Information Booster:

• MAT is calculated under Section 115JB of the Income Tax Act.
• It is levied at 15% on the book profits of a company.
• Companies earning profits but paying zero or negligible tax due to incentives/exemptions are brought into the tax net using MAT.
• MAT credit can be carried forward and set off in future assessment years when normal tax exceeds MAT.

Additional Information:

• The original MAT rate was 18.5%, reduced to 15% later.
• Companies in Special Economic Zones (SEZs) and certain infrastructure sectors are exempt from MAT under specific conditions.
• The Finance Act and Union Budget may revise rates and provisions related to MAT periodically.