Mat Credit Entitlement

A tax credit scheme is introduced by which mat paid can be carried forward for set off against regular tax payable during the subsequent fifteen years period subject to certain conditions as under.

Mat credit entitlement.

If this circumstance does not arise and mat credit stays in the loans and advances column of the company s balance sheet till the end of the specified period after which it is simply written off. Suggestion on clause 46 a of finance bill 2017 section 115jaa extension of period of carry forward of mat credit from 10 years to 15 years clarity regarding carry forward and set off of mat credit in cases where the ten year period has expired on or before ay 2016 17 but the fifteen year period has still not expired. Such tax credit shall be carried forward for 15 assessment years immediately succeeding the assessment year in which such credit has become allowable. They do so by showing the mat credit as mat credit entitlement to the credit of the income and expenditure amount.

Mat credit under section 115jaa. In the year of set off of credit the amount of credit availed should be shown as deduction from the provision of taxation on the liabilities side of the balance sheet. There is a credit of mat of 4 68 000 which can be carried forward to 15 assessment year. Mat credit entitlement loans and advances dr 20 to mat expenses indirect expenses 20 summarizing the above situation the expenses debited to profit and loss will be rs 80 balance in mat expenses a c short term provisions shows mat payable of rs 100 loans and advances shows mat credit amounting to rs.

Rs 14 43 000 rs 12 48 000 rs 1 95 000. 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. Thus mat credit can be understood as the difference between the tax calculated under the general provisions of the income tax act. 1 lakh the tax liability as per the normal provisions for fy 2019 20 is rs.

The maximum amount of mat credit that you can claim cannot exceed the difference between the normal tax liability and the mat liability in the year for which the mat credit is being availed. To mat credit entitlement account the difference arising out of mat paid and mat credit entitlement can be treated as tax paid during the year. Any company that pays minimum alternate tax under the mat clause instead of regular tax then if the tax paid is more than that accrued the excess amount is credited back as tax credit to the company. In a case where the total income of the company.

Mat credit and carry forward provisions indicate that it was always the intention that mat should not be a final tax on a company. The unavailed amount of mat credit entitlement if any should continue to be presented under the head loans advances. 4 relevant extract of the budget speech 1996 97. If a company has mat credit of rs.

10 lakh while that as per the. This is with effect from ay 2018 19 prior to which mat could be carried forward only for a period of 10 ays.