Mat Credit Entitlement Example

Rs 14 43 000 rs 12 48 000 rs 1 95 000.

Mat credit entitlement example.

Accounting for this credit would be made if the company is expecting to utilize this credit before it lapses in the future. Ans when the amount of minimum alternate tax mat for a company is greater than its normal tax liability the difference between mat and normal tax liability is called mat credit. 100 tax as per mat rs 80 tax as per normal provisions i e. Profit loss account.

Such tax credit shall be carried forward for 15 assessment years immediately succeeding the assessment year in which such credit has become allowable. To profit loss a c cr. Mat credit entitlement will be treated as an asset and the accounting will be done by crediting the profit loss a c if there is a virtual certainty that the company will be able to recover the mat credit entitlement in future limited period. Allowed a huge amount and in some cases where set off could be claimed but the a o.

According to paragraph 6 of accounting standards interpretation asi 6 accounting for taxes on income in the context of section 115jb of the income tax act 1961 issued by the institute of chartered accountants of india mat is the current tax. This mat credit can be carried forward and set off for 10 consecutive assessment years succeeding the year in which the tax credit first accrued. Tax liability of a company for fy 2019 20 under normal provisions of the income tax act is rs. For more information on mat credit refer to this article.

In the above case mat credit rs. While writing down the mat credit entitlement following entry is to be passed. Provision for taxation a c dr. 8 lakh while the liability as per the provisions of mat is rs.

It must also be noted that deferred tax charge is not covered by any other clause of the explanation to section 115jb 2 and is therefore not required to be added back in the computation of book profits for the purpose of section 115jb. Such excess of tax credit is allowed to be carried forward and set off in the financial year in which the company is liable to pay tax under the general provisions of the income tax act. Moreover the mat credit set off can only be to the extent of the difference between the regular corporate tax and mat liability calculated. The cag has reviewed 182 cases in 19 states and found that in some cases there was none or minimal set off that could be claimed but the a o.

Profit loss a c dr. The following entry is to passed mat credit entitlement a c dr. The unavailed amount of mat credit entitlement if any should continue to be presented under the head loans advances. While availing the mat credit.

The difference arising out of mat paid and mat credit entitlement can be treated as tax paid during the year. Rejected the set off. Mat credit is rs 20. This is with effect from ay 2018 19 prior to which mat could be carried forward only for a period of 10 ays.

Since the company is liable to pay mat the company can avail the difference of the tax payable as per mat and tax payable as per normal provisions as mat credit.