Curated commentaries and expert insights on selected statutory provisions,
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Income Tax Bill 2025 introduces Schedule-XIII replacing Schedule 11 with streamlined luxury goods exclusions The Income Tax Bill 2025 introduces Schedule-XIII, which replaces Schedule 11 of the Income-tax Act 1961, listing specific articles excluded from certain tax benefits. Both schedules serve to restrict tax incentives for luxury, non-essential, or "sin goods" to channel fiscal benefits toward priority economic sectors. Schedule-XIII contains 15 streamlined items compared to Schedule 11's original 29 items, many of which were later omitted. Key excluded items include alcoholic beverages, tobacco, cosmetics, aerated waters, confectionery, gramophones, projectors, photographic equipment, office machines (excluding computers), steel furniture, safes, and packaging materials. The new schedule integrates explanatory text directly into main provisions rather than using separate footnotes, improving clarity. While maintaining core policy objectives of excluding luxury goods from tax incentives, Schedule-XIII reflects legislative modernization through simplified structure and removal of obsolete items, though some outdated entries like gramophones remain, indicating need for periodic review.
Income Tax Bill 2025 Schedule-XII mirrors 1961 Act's mineral list for tax deductions The Income Tax Bill 2025's Schedule-XII and the Income-tax Act 1961's Schedule 07 both enumerate identical lists of 27 minerals and 16 groups of associated minerals eligible for tax benefits related to mineral prospecting, extraction, and processing. Both schedules serve to provide legal certainty regarding which minerals qualify for capital expenditure deductions. The lists include primary ores like iron ore, copper, and gold, alongside strategic minerals such as rare earths, uranium, and thorium. The schedules also recognize associated mineral groups to accommodate multi-mineral mining operations. Minor differences exist only in spelling variations and typographical conventions. The legislative continuity ensures stability for mining industry tax planning while maintaining focus on minerals critical for energy, defense, and technology sectors, though periodic updates may be needed to address emerging mineral classifications.
Income Tax Bill 2025 Schedule-XI modernizes provident fund regulations while preserving tax incentives and recognition criteria The Income Tax Bill 2025's Schedule-XI modernizes the regulatory framework for provident, superannuation, and gratuity funds while maintaining core provisions from the Income-tax Act 1961's Schedule 04. The legislation preserves essential tax incentives and recognition criteria, including the 12% employer contribution threshold, five-year service exemption for accumulated balances, and irrevocable trust requirements. Key modernizations include streamlined language, explicit inclusion of capital gains in fund assets, and clarified procedures for funds with employees abroad. The framework continues to exclude funds under the Provident Funds Act 1925 and maintains linkage with the Employees' Provident Funds Act 1952. Recognition conditions remain unchanged, requiring fixed employee contributions, employer contributions not exceeding employee amounts, and strict asset composition rules. Tax treatment provisions are preserved, including retroactive taxation for non-exempt balances and mandatory tax deduction at source. The Board retains rulemaking powers with updated statutory references. Overall, the transition ensures regulatory continuity while addressing operational ambiguities and aligning with contemporary employment practices.
Income Tax Bill 2025 Schedule-XIV preserves existing insurance taxation framework while updating section references and terminology The Income Tax Bill 2025's Schedule-XIV largely preserves the existing insurance business taxation framework from the 1961 Act's First Schedule while modernizing terminology and cross-references. Both schedules mandate separate computation of life insurance profits using actuarial valuations and annual averaging of surplus/deficit from inter-valuation periods. For other insurance businesses, profits are computed from statutory profit and loss accounts with specific adjustments for inadmissible expenses, investment gains/losses, and reserves for unexpired risks. The 2025 Bill updates section references for disallowed expenses from sections 30-43B to sections 28-54, potentially broadening the scope of add-backs. Non-resident insurers continue to have profits attributed proportionally based on premium income ratios. Key provisions remain unchanged including cash-basis deductions for certain statutory liabilities and investment-related adjustments. The changes are evolutionary, focusing on legislative modernization rather than substantive reform, though the expanded disallowance sections may impact tax computations requiring careful review by insurers.
Government gets 3-year power under Clause 535 to resolve Income Tax Bill 2025 implementation difficulties The Income Tax Bill, 2025 contains Clause 535, a removal of difficulties provision that grants the Central Government power to address implementation issues during the transition from the Income-tax Act, 1961. The clause allows the government to issue orders resolving practical difficulties, provided they remain consistent with the Act's provisions. It specifically enables adaptations for assessments relating to tax years ending March 31, 2026 or earlier. The power is limited to three years from April 1, 2026, and all orders must be laid before Parliament for oversight. This mirrors Section 298 of the 1961 Act, which facilitated the earlier transition from the 1922 Act. Both provisions include similar safeguards: consistency requirements, temporal limitations, and parliamentary scrutiny to prevent executive overreach while ensuring smooth statutory transitions.
Income Tax Bill 2025 Clause 536 repeals 1961 Act with comprehensive transitional provisions protecting rights and ongoing proceedings The Income Tax Bill 2025's Clause 536 formally repeals the Income-tax Act 1961 while establishing comprehensive transitional provisions to ensure legal continuity. The clause protects accrued rights, ongoing proceedings, and allows continuation of assessments for tax years beginning before April 1, 2026 under the old Act. Key provisions include carry-forward of losses and tax credits, preservation of elections and declarations, continuation of pending proceedings, and protection of conditional deductions. The clause addresses modern complexities like digital assessment schemes and provides detailed treatment of various loss categories, MAT/AMT credits, and search proceedings. Unlike its predecessor Section 297 of the 1961 Act, Clause 536 is more granular and anticipates wider scenarios, reflecting six decades of tax system evolution and increased administrative sophistication.
Income Tax Bill 2025 Clause 534 streamlines parliamentary oversight of tax rules and notifications The Income Tax Bill, 2025 introduces Clause 534 to replace Section 296 of the Income-tax Act, 1961, both governing parliamentary oversight of delegated legislation in tax law. Clause 534 requires the Central Government to lay before Parliament: (a) rules made under the Act, (b) Appellate Tribunal procedural rules under Section 364, and (c) notifications under Sections 263(3), 264, and Chapter XIII-G. These must be laid within thirty days across parliamentary sessions, allowing both Houses to modify or annul them before the following session expires. The provision includes a "without prejudice" clause protecting prior actions. Compared to Section 296, Clause 534 narrows the scope by excluding Settlement Commission and Authority for Advance Rulings procedural rules, while introducing new notification categories. This streamlining reflects institutional changes in the new tax regime while maintaining the constitutional principle of legislative oversight over executive rule-making powers.
Income Tax Bill 2025 Clause 533 continues CBDT rule-making powers from Section 295 with modernized cross-references The Income Tax Bill 2025's Clause 533 carries forward the rule-making framework from Section 295 of the Income Tax Act 1961, empowering the Central Board of Direct Taxes to create subordinate legislation for effective tax administration under Central Government control. The provision maintains the four-part structure: general rule-making power, illustrative list of specific matters, estimation methods for income determination, and retrospective effect provisions with taxpayer protection safeguards. While substantially similar to its predecessor, Clause 533 modernizes cross-references to reflect the restructured Act and integrates contemporary administrative needs including digital processes and international compliance. The provision enables administrative flexibility, technical detailing, and policy implementation while maintaining judicial oversight against ultra vires exercise. This framework supports complex tax administration requirements, as exemplified by existing rules like Rule 44G governing Mutual Agreement Procedures under tax treaties, ensuring continuity in India's tax regulatory structure.
Government gains power to rescind tax exemptions for Union territories under Clause 531 of Income Tax Bill 2025 Clause 531 of the Income Tax Bill, 2025 empowers the Central Government to rescind tax exemptions, rate reductions, or modifications previously granted under Section 294A of the Income-tax Act, 1961 for certain Union territories including Dadra and Nagar Haveli, Goa, Daman and Diu, and Puducherry. While Section 294A was a transitional provision designed to facilitate integration of these territories into India's tax regime with a sunset clause ending March 31, 1967, Clause 531 provides ongoing authority to withdraw these legacy benefits. The provision aims to promote tax uniformity and administrative efficiency by eliminating outdated exemptions. However, it lacks procedural safeguards such as notice requirements or hearing provisions, potentially exposing rescission orders to judicial challenge on grounds of arbitrariness. The clause may also raise concerns regarding compliance with international treaty obligations, particularly the Treaty of Cession with France concerning Puducherry.
Income Tax Bill 2025 Clause 530 ensures tax continuity when no Central Act charges income tax at year start The Income Tax Bill 2025's Clause 530 replaces Section 294 of the Income-tax Act 1961, addressing legislative gaps when no Central Act charges income tax at the start of a tax year. Both provisions ensure continuity by deeming either the previous year's tax provisions or those proposed in pending parliamentary bills to be in force, whichever is more favorable to the taxpayer. The clause prevents administrative paralysis and protects taxpayers from retrospective or harsh provisions during interim periods. Key changes include updated terminology from "assessment year" to "tax year" while maintaining identical substantive protections. The provision creates a legal fiction ensuring seamless tax administration until the Finance Act is enacted, incorporating taxpayer-friendly safeguards. Potential ambiguities exist regarding the definition of "more favorable" and application to procedural versus substantive provisions. The clause represents legislative foresight ensuring stability and fairness in tax collection while protecting both revenue interests and taxpayer rights during transitional periods.
Income Tax Bill 2025 Clause 532 expands government power to create tax administration schemes without sunset provisions Clause 532 of the Income Tax Bill, 2025 grants the Central Government broad powers to frame schemes for tax administration efficiency, transparency, and accountability. The provision aims to eliminate taxpayer-authority interface through technology and optimize resources via functional specialization. Unlike Section 293D of the 1961 Act, which is limited to approval/registration processes, Clause 532 covers any purpose under the Act without sunset provisions. The government can modify statutory provisions through notifications to implement schemes, subject to parliamentary oversight. The clause includes transitional provisions for existing schemes under the 1961 Act. While promoting digitization and reducing corruption opportunities, concerns exist regarding the breadth of delegated power, absence of temporal limitations, and potential challenges for less technologically literate taxpayers. The provision represents significant expansion of executive scheme-making authority in tax administration.
Government can withdraw tax approvals under Section 293C and proposed Clause 529 after hearing assessee The Income Tax Bill 2025's Clause 529 and the current Income-tax Act 1961's Section 293C both empower the Central Government, Board, or income-tax authority to withdraw any statutory approval granted under the Act, even without express withdrawal provisions in the enabling section. Both require recording reasons and providing the assessee a reasonable opportunity to be heard before withdrawal. The key difference lies in procedural language: Section 293C requires "reasonable opportunity of showing cause against the proposed withdrawal" while Clause 529 uses "reasonable opportunity of being heard." This modernized wording in Clause 529 is slightly broader but maintains the same substantive protections. Neither provision imposes time limitations for withdrawal, creating ongoing uncertainty for approval holders. The provisions serve to prevent abuse of statutory approvals while maintaining procedural safeguards consistent with natural justice principles.
Central Government gets discretionary power to condone delays in tax approvals under Clause 528 and Section 293B The Central Government or Board has discretionary power to condone delays in obtaining required approvals under both Clause 528 of the Income Tax Bill, 2025 and Section 293B of the Income-tax Act, 1961. Both provisions use nearly identical language, requiring "sufficient cause" for condonation without defining specific criteria. The power applies to all approvals required before specified dates, including exemptions for charitable trusts, corporate restructuring, and tax incentives. While providing administrative flexibility and relief from rigid timelines, the provisions lack procedural guidelines, time limits for seeking condonation, and appeal mechanisms. The discretionary nature requires authorities to exercise judgment based on factors like administrative delays, genuine mistakes, or force majeure events. This mechanism balances procedural compliance with substantive justice, reducing litigation while requiring clear administrative guidelines to prevent inconsistent application and ensure transparency in tax administration.
Income Tax Bill 2025 Clause 527 gives government discretionary power for mineral oil tax exemptions The Income Tax Bill 2025's Clause 527 grants the Central Government discretionary power to provide tax exemptions, reductions, or modifications for entities engaged in mineral oil prospecting, extraction, and production. This provision largely mirrors Section 293A of the Income Tax Act 1961, maintaining continuity in India's policy to attract investment in the strategically important energy sector. The clause covers three classes of beneficiaries: entities with government agreements for mineral oil operations, service providers and equipment suppliers, and their employees. Key features include retrospective applicability from April 1992, broad executive discretion based on "public interest," and parliamentary oversight through notification requirements. While the provision offers necessary flexibility for negotiating fiscal terms with investors and responding to market conditions, it raises concerns about transparency and accountability. The subjective "public interest" standard and lack of detailed criteria for granting exemptions could lead to arbitrary application. The retrospective effect and broad discretionary power may create uncertainty for taxpayers despite the provision's importance for energy security and investment attraction.
Clause 526 Income Tax Bill 2025 bars civil suits challenging tax proceedings, mirrors Section 293 of 1961 Act Clause 526 of the Income Tax Bill, 2025 mirrors Section 293 of the Income-tax Act, 1961, establishing a comprehensive bar on civil suits challenging tax proceedings or orders. The provision operates through two mechanisms: first, it prohibits civil courts from entertaining suits to set aside or modify any proceeding or order under the Act; second, it provides immunity to the government and its officers for good faith actions taken under the Act. This legislative framework ensures tax disputes are resolved exclusively through specialized appellate mechanisms including the Commissioner (Appeals), Income Tax Appellate Tribunal, and constitutional courts. The bar prevents parallel litigation and maintains the integrity of tax administration, though exceptions exist for ultra vires actions, bad faith conduct, or constitutional violations. The provision requires taxpayers to exhaust statutory remedies while protecting officials from vexatious litigation, ensuring efficient tax enforcement within the specialized framework.
Income Tax Bill 2025 Clause 525 allows joint search authorizations for multiple persons without creating collective liability Clause 525 of the Income Tax Bill, 2025 addresses procedural requirements for search and requisition authorizations involving multiple persons, mirroring Section 292CC of the Income Tax Act, 1961. The provision eliminates the need for separate authorizations for each person when conducting searches or requisitions involving multiple individuals. It clarifies that mentioning multiple names in a single authorization does not constitute formation of an association of persons or body of individuals. Despite joint authorization, assessments must be made separately for each named person. This streamlines administrative procedures for tax authorities while protecting taxpayer rights by preventing collective liability based on procedural formality. The provision maintains continuity with existing law, updating only statutory cross-references to sections 247 and 248 from the previous sections 132 and 132A, reflecting the reorganization of the new tax statute while preserving established legal principles.
Income Tax Bill 2025 Clause 524 creates rebuttable presumptions for assets found during searches including virtual digital assets The Income Tax Bill 2025's Clause 524 establishes rebuttable presumptions regarding assets, books of account, and documents found during search or survey operations. When items are discovered during searches or surveys, the provision presumes ownership by the person in whose possession they are found, veracity of book contents, authenticity of signatures and handwriting, and due execution of stamped documents. A key expansion from the existing Section 292C of the Income-tax Act 1961 is the explicit inclusion of virtual digital assets alongside traditional items like money, bullion, and jewellery. The provision extends these presumptions to requisitioned materials, treating them as if found during search operations. While structurally similar to Section 292C, Clause 524 modernizes terminology and references updated procedural sections. The presumptions are rebuttable, allowing taxpayers to provide contrary evidence, thus balancing investigative efficiency with taxpayer rights while addressing contemporary economic realities.
Income Tax Bill 2025 Clause 523 creates legal fiction deeming notices served when assessee participates in proceedings Clause 523 of the Income Tax Bill, 2025 mirrors Section 292BB of the Income-tax Act, 1961, addressing validity of notices in tax proceedings. The provision creates a legal fiction that any required notice has been duly served when an assessee has appeared in proceedings or cooperated in inquiries relating to assessment or reassessment. This prevents assessees from raising technical objections about non-service, delayed service, or improper service of notices after participating in proceedings. However, an exception preserves the assessee's right to object if raised before completion of assessment or reassessment. The provision aims to prevent assessments from being invalidated on technical grounds while maintaining procedural fairness. It reduces litigation based on procedural technicalities and promotes administrative efficiency, though judicial interpretation has clarified it cannot cure complete absence of jurisdictional notices.
Income Tax Bill 2025 Clause 522 protects tax documents from invalidation due to minor technical errors Clause 522 of the Income Tax Bill, 2025 mirrors Section 292B of the Income-tax Act, 1961, providing that tax documents and proceedings shall not be invalidated solely due to mistakes, defects, or omissions, provided they substantially comply with the Act's intent and purpose. The provision covers returns, assessments, notices, summons, and other proceedings, protecting against technical challenges while maintaining substantive requirements. It does not cure jurisdictional errors, violations of natural justice, or substantive non-compliance. The clause aims to prevent miscarriage of justice from procedural technicalities, reduce frivolous litigation, and promote administrative efficiency. Courts have consistently held that minor errors are condoned if essential legal requirements are met, but fundamental defects remain incurable. This provision reinforces the principle that substance should prevail over form in tax administration.
Income Tax Bill 2025 Clause 521 bars adult tax offenders from probation under new criminal codes Clause 521 of the Income Tax Bill, 2025 excludes adult tax offenders from probationary relief under the Probation of Offenders Act, 1958 and section 401 of the Bharatiya Nagarik Suraksha Sanhita, 2023, with an exception for persons under eighteen years. This provision updates Section 292A of the Income-tax Act, 1961, which similarly barred probation but referenced the Code of Criminal Procedure, 1973. The legislative intent remains consistent: treating tax offences as serious economic crimes warranting actual punishment rather than conditional discharge. Courts cannot grant probation to adult tax offenders, ensuring uniformity in sentencing and enhancing deterrence. The updated statutory references align with the new criminal procedure code while maintaining the same policy objectives of strict enforcement and revenue protection.
imposition of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) on various classes of taxpayers : Clause 206(1) of the Income Tax Bill, 2025 Vs. Section 115JA of the Income-tax Act, 1961
Clause 206(1) of the Income Tax Bill, 2025 (hereinafter "Clause 206(1)") introduces a comprehensive framework for the imposition of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) on various classes of taxpayers, including companies, co-operative societies, and other persons. This provision is a successor to and substantial evolution of the erstwhile Section 115JA of the Income-tax Act, 1961 ("Section 115JA"), which was the first statutory codification of the MAT regime in India, applicable to companies for a specified period (assessment years 1997-98 to 2000-01).
The MAT regime was conceptualized to address the issue of "zero tax companies," i.e., companies that, despite having substantial book profits, paid little or no tax due to various deductions and exemptions available under the Act. Section 115JA sought to ensure that such companies contributed a minimum amount of tax based on their book profits. Over the years, with evolving business practices, accounting standards, and policy objectives, the MAT/AMT framework has undergone significant changes, culminating in the elaborate provisions proposed in Clause 206 of the Income Tax Bill, 2025.
This commentary undertakes a detailed analysis of Clause 206(1), its objectives, mechanism, and practical implications, followed by a comparative evaluation with Section 115JA, highlighting key similarities, distinctions, and policy rationales.
2. Objective and Purpose
2.1 Legislative Intent behind Clause 206(1)
The primary objective of Clause 206(1) is to ensure that all taxpayers, especially those availing of substantial deductions, exemptions, or incentives under the Income Tax Act, contribute a minimum quantum of tax based on their book profits (for companies) or adjusted total income (for other persons). The provision is designed to plug revenue leakages arising from aggressive tax planning and to promote horizontal equity in taxation.
The inclusion of various classes of taxpayers (companies, co-operative societies, other persons) and the detailed mechanism for computation and adjustment reflects the legislature's intent to create a robust, anti-avoidance framework that is aligned with contemporary accounting standards and international best practices.
2.2 Policy Considerations and Historical Background
The policy rationale for MAT/AMT, as first enshrined in Section 115JA, was to counteract the proliferation of "zero tax companies" and ensure a minimum tax base. Over time, the regime has expanded to cover non-corporate taxpayers (through AMT), incorporated nuanced adjustments to reflect modern accounting standards (such as Ind AS), and provided targeted reliefs for specific sectors (e.g., International Financial Services Centres, IFSCs). Clause 206(1) embodies these policy developments, aiming for a balance between revenue protection and incentivization of priority sectors.
Clause 206(1) operates as a non-obstante provision, overriding all other provisions of the Act. It applies to all assessees listed in the prescribed Table, including companies (with special rates for IFSC units), co-operative societies, and other persons (excluding certain categories). The provision triggers when the tax payable on total income as computed under the Act is less than a specified percentage of book profit (for companies) or adjusted total income (for others).
3.2 Mechanism of Operation
Deemed Total Income: Where the regular tax liability is less than the specified percentage of book profit/adjusted total income, the latter is deemed to be the total income for tax purposes.
Prescribed Rates: The Table specifies the applicable rates:
15% of book profit for domestic companies (other than IFSC units).
9% of book profit for IFSC units (companies earning solely in convertible foreign exchange).
18.5% of adjusted total income for non-corporate assessees (excluding co-ops and IFSC units).
9% for non-corporate IFSC units.
15% for co-operative societies.
Computation of Book Profit and Adjusted Total Income:
Book Profit (for companies): Computed as per a specified formula (B = P + (I-R)), where P is profit per statement of profit and loss, I is the sum of items to be increased, and R is the sum of items to be reduced, as detailed in sub-section (2) of Clause 206.
Adjusted Total Income (for others): Total income before effect to this section, increased by specified deductions (e.g. under Chapter VIII-C, section 144, section 46, reduced by depreciation as per section 33).
3.3 Key Provisions and Interpretative Issues
3.3.1 Items to be Increased and Reduced (Book Profit Computation)
The provision meticulously enumerates items to be added back to, or deducted from, the net profit as per the statement of profit and loss. These include income-tax provisions, reserves, provisions for unascertained liabilities, losses of subsidiaries, dividends, certain expenditures, depreciation, deferred tax, diminution in asset value, and specified adjustments for special categories (e.g., Ind AS companies, companies under insolvency, etc.).
Similarly, reductions are provided for withdrawals from reserves (with anti-abuse conditions), income exempt under specified provisions, depreciation (excluding revaluation), certain losses, and other specified items.
This detailed approach seeks to ensure that the book profit reflects the real economic profit of the company, minimizing the scope for manipulation through accounting entries.
3.3.2 Special Provisions for Certain Assessees
Clause 206(1) and its subsequent sub-sections provide tailored adjustments for various classes of taxpayers, including:
Members of associations of persons or bodies of individuals (AOP/BOI).
Foreign companies (with special rules for income taxed at concessional rates).
Companies involved in business trusts, demergers, or subject to insolvency proceedings.
Companies following Ind AS, with transition adjustments spread over five years.
These provisions reflect an attempt to address the diverse tax positions and accounting practices of different taxpayers, thereby enhancing the equity and accuracy of the MAT/AMT regime.
3.3.3 Exemptions and Non-Applicability
Clause 206(6), (17), and (18) carve out significant exceptions. Notably, foreign companies without a permanent establishment, certain insurance companies, specified funds, and small taxpayers (with adjusted total income below INR 20 lakhs) are excluded. Further, the provision does not apply to successor LLPs in case of conversion, and to persons opting for certain alternative tax regimes.
3.3.4 MAT Credit and Carry Forward
A robust mechanism is provided for the grant, carry forward, and set-off of MAT/AMT credit, with a maximum carry-forward period of 15 years. No interest is payable on MAT credit, and adjustments are prescribed for foreign tax credits and subsequent changes in tax liability due to appellate orders.
3.3.5 Procedural and Compliance Requirements
Assessees subject to Clause 206 must obtain and furnish a report from an accountant certifying the computation of book profit or adjusted total income, thereby ensuring procedural rigor and minimizing disputes.
3.4 Practical Implications
Wider Applicability: Unlike Section 115JA, which applied only to companies, Clause 206(1) extends MAT/AMT to co-operative societies and other non-corporate persons, subject to specified thresholds and exceptions.
Targeted Incentives: Lower MAT/AMT rates for IFSC units and certain non-corporate assessees encourage the development of international financial services and align with India's policy of promoting global competitiveness.
Alignment with Modern Accounting: The provision incorporates adjustments for Ind AS convergence, reflecting the transition to global accounting standards and reducing the scope for accounting arbitrage.
Enhanced Compliance Burden: The detailed adjustments, reporting requirements, and need for professional certification increase compliance costs but are justified by the need for accuracy and anti-abuse.
Relief for Distressed Entities: Special reliefs for companies under insolvency or sick industrial companies provide necessary breathing space to distressed businesses.
4. Comparative Analysis: Clause 206(1) vs. Section 115JA
4.1 Scope and Applicability
Section 115JA: Applied exclusively to companies for a limited period (AY 1997-98 to AY 2000-01), with a flat MAT rate of 30% of book profit.
Clause 206(1): Applies to a much wider spectrum of taxpayers (companies, co-ops, other persons), with differentiated rates and broader, more permanent application.
4.2 Computation of Book Profit
Section 115JA: Book profit was defined as net profit per P&L account (as per Schedule VI to the Companies Act, 1956), increased by specified items (tax provisions, reserves, provisions for unascertained liabilities, etc.) and reduced by withdrawals from reserves, exempt income, certain losses, and profits from specified undertakings.
Clause 206(1): Retains the core structure but significantly expands the list of adjustments, incorporates Ind AS-related items, and provides detailed computational rules for special cases (e.g., business trusts, IFSC units, insolvency cases).
4.3 Rates and Thresholds
Section 115JA: Flat 30% of book profit for all companies.
Clause 206(1): Graduated rates (15%, 9%, 18.5%) based on class of assessee and special status (e.g., IFSC), reflecting a more nuanced, incentive-driven approach.
4.4 Adjustments for Losses and Depreciation
Section 115JA: Allowed reduction for loss brought forward or unabsorbed depreciation (whichever is less) as per books; certain exclusions applied.
Clause 206(1): Retains this principle but introduces further exceptions for companies under insolvency or specified circumstances, and provides for detailed tracking of such adjustments.
4.5 Special Provisions and Carve-outs
Section 115JA: Excluded profits from power generation, infrastructure, industrially backward areas, and sick industrial companies for specified periods.
Clause 206(1): Expands carve-outs to include IFSC units, specified funds, certain foreign companies, insurance companies, small taxpayers, and those under alternative tax regimes.
4.6 MAT Credit Mechanism
Section 115JA: Did not provide for MAT credit; this was introduced only with Section 115JAA (from AY 2001-02 onwards).
Clause 206(1): Contains a detailed MAT/AMT credit regime, including carry forward, set-off, and adjustment for foreign tax credits and appellate orders, with a 15-year carry forward period.
4.7 Procedural Requirements
Section 115JA: Required preparation of P&L account as per Companies Act, 1956, and calculation of depreciation as per the same basis as for AGM presentation.
Clause 206(1): Requires professional certification of computation, and alignment with Companies Act, 2013 (or governing enactments for special companies), reflecting updated corporate law.
Clause 206(1): Incorporates adjustments for Ind AS convergence, transition amounts, and other comprehensive income, reflecting the evolution of Indian accounting standards.
4.9 Anti-Avoidance and Anti-Abuse Measures
Section 115JA: Provided basic anti-abuse rules for withdrawal from reserves/provisions.
Clause 206(1): Incorporates more sophisticated anti-abuse measures, including detailed rules for reserves, provisions, transition adjustments, and special situations.
4.10 Relief for Distressed Entities
Section 115JA: Provided relief for sick industrial companies for a limited period.
Clause 206(1): Expands relief to companies under insolvency proceedings, those with suspended boards, and provides for special treatment of profits/losses during the rehabilitation period.
5. Practical Implications and Stakeholder Impact
5.1 For Companies
Clause 206(1) modernizes the MAT regime, aligning it with contemporary business realities and accounting standards. The provision ensures that companies, especially those availing of substantial deductions or operating in special economic zones, contribute a fair share of tax. The differentiated rates for IFSC units incentivize international financial activity, while the detailed computational rules reduce ambiguity and potential for disputes.
5.2 For Non-Corporate Assessees
The extension of AMT to non-corporate entities (co-operatives, others) brings parity and broadens the tax base, though small taxpayers are protected through income thresholds. Co-operative societies, which previously enjoyed more favorable tax treatment, are now subject to minimum tax, reflecting a shift towards a more uniform regime.
5.3 For Foreign Companies and Multinationals
The carve-outs for foreign companies without a PE, and for those earning only specified income taxed at concessional rates, provide clarity and avoid double taxation. The alignment with international tax treaties and the exclusion of certain IFSC activities enhance India's attractiveness as a global financial hub.
5.4 For Distressed and Special Entities
Companies under insolvency, sick industrial companies, and those undergoing restructuring are provided relief, reducing the tax burden during critical periods and facilitating business revival.
5.5 Compliance and Administrative Burden
While the provision enhances tax equity and revenue, it imposes significant compliance obligations, including detailed computations, professional certification, and ongoing tracking of MAT/AMT credit. However, these requirements are necessary to ensure the integrity of the regime and minimize litigation.
6. Comparative Insights and Unique Features
Broader Applicability:Clause 206(1) applies to a wider range of taxpayers than Section 115JA, reflecting the evolution of the Indian tax base.
Modern Accounting Integration: Incorporation of Ind AS adjustments and transition amounts demonstrates a forward-looking approach, making the regime compatible with global standards.
Nuanced Incentivization: Special rates for IFSC units and carve-outs for specified funds reflect targeted policy interventions to promote priority sectors.
Comprehensive Credit Mechanism: The MAT/AMT credit regime is more robust and taxpayer-friendly, though subject to anti-abuse safeguards.
Enhanced Relief for Distressed Businesses: The inclusion of special rules for companies under insolvency or with suspended boards reflects a pragmatic approach to business cycles.
7. Conclusion
Clause 206(1) of the Income Tax Bill, 2025 represents a significant evolution of the MAT/AMT regime originally introduced by Section 115JA of the Income-tax Act, 1961. While retaining the core principle of ensuring a minimum tax contribution based on book profits or adjusted total income, the new provision expands the ambit, introduces nuanced rates and adjustments, and aligns the regime with modern accounting standards and policy objectives. The comparative analysis reveals a shift from a simple, company-centric MAT to a comprehensive, multi-tiered framework
imposition of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) on various classes of taxpayers : Clause 206(1) of the Income Tax Bill, 2025 Vs. Section 115JA of the Income-tax Act, 1961
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Comprehensive Tax Reform: Minimum Alternate Tax Expands Coverage and Closes Loopholes for Diverse Taxpayer Categories
Legal Document Summary:The text analyzes Clause 206(1) of the Income Tax Bill, 2025, which introduces a comprehensive framework for Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT). The provision expands tax coverage to various taxpayer categories, ensuring minimum tax contributions by addressing tax avoidance strategies. It introduces differentiated tax rates, detailed computational rules, and special provisions for different entities, including companies, cooperative societies, and other persons. The clause modernizes the previous tax regime by incorporating contemporary accounting standards, providing targeted incentives, and establishing a robust credit mechanism with enhanced anti-avoidance measures.
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