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TMI BlogReducing tax avoidance by curbing the excessive use of deductions and exemptions by corporate and select non-corporate entities : Clause 206(18) of the Income Tax Bill, 2025 Vs. Section 115JEE of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ectives, practical implications, and a clause-by-clause comparison with Section 115JEE of the Income-tax Act, 1961, which governs the application of AMT to non-corporate entities. Objective and Purpose The legislative intent behind MAT and AMT is to ensure a fair and equitable tax regime, preventing entities from escaping tax liability through aggressive tax planning. Clause 206(18) serves as a critical filter, delineating the classes of taxpayers and circumstances under which the MAT/AMT regime would not apply. The rationale is to avoid imposing minimum tax liability in situations where either policy reasons or practical considerations warrant exclusion, such as for certain life insurance companies, entities opting for alternative tax regimes, or those with low adjusted total income. Detailed Analysis of Clause 206(18) of the Income Tax Bill, 2025 (a) Exclusion for Life Insurance Companies This sub-clause exempts companies whose income arises from life insurance business as referred to in section 194(1)(Table: Sl. No. 6). The rationale is rooted in the unique nature of life insurance business, where accounting for policyholder liabilities, actuarial valuations, and regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegories of investment funds, such as those operating in International Financial Services Centres (IFSCs), alternative investment funds (AIFs), or other notified entities. The policy consideration is to maintain the competitiveness of India's financial sector, particularly IFSCs, by exempting such funds from MAT/AMT, which could otherwise erode returns and deter international capital. Practical Implications The exclusions under Clause 206(18) have wide-ranging practical implications: * Life Insurance Companies: The exclusion removes the compliance burden and potential distortions in tax liability for life insurers, aligning with global best practices. * Alternative Regime Opters: Taxpayers who choose the concessional rate regimes are incentivized, as they are not subject to MAT/AMT, making the new regimes more attractive and administratively simpler. * Presumptive Regime Taxpayers: The exclusion avoids the double imposition of minimum tax on entities already taxed on a presumptive basis, ensuring fairness. * Small Non-Corporate Taxpayers: Individuals, HUFs, AOPs, BOIs, and AJPs with modest income are spared from MAT/AMT, reducing compliance costs for small taxpayers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Structure: Clause 206(18) is part of a much more detailed and integrated MAT/AMT regime, covering both companies and non-corporate entities, and providing for a wider range of exclusions and computational refinements. Point-by-Point Comparison Topic Clause 206(18) of the Income Tax Bill, 2025 Section 115JEE of the Income-tax Act, 1961 Analysis/Comments Exclusion for Life Insurance Companies Expressly excludes companies with income from life insurance business (s.194(1)(Table: Sl. No. 6)) No specific exclusion More explicit in new Bill; addresses a gap in the old regime, aligning with sector-specific tax treatment. Exclusion for Alternative Tax Regime Opters Excludes those who opt for alternative regimes (s.200(5), 201(2), etc.) No direct parallel; old Act only provides for AMT exclusion if deductions are not claimed New Bill proactively excludes alternative regime opters, reflecting policy shift towards concessional, deduction-less regimes. Exclusion for Presumptive Taxation Excludes those whose tax is computed under s.202(1) No direct parallel Addresses practical issues in applying MAT/AMT to presumptive regimes, which was a source of ambigu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds and IFSC Entities: The explicit exemption for specified funds and IFSC units supports the development of India's financial sector and enhances international competitiveness. * Tax Administrators: Clearer exclusions reduce the administrative complexity and potential for disputes on MAT/AMT applicability, allowing focus on higher-value cases. Ambiguities and Issues in Interpretation * Definition of Specified Funds: The reference to "specified funds referred to in Schedule VI (Note 1)" in the new Bill must be read in conjunction with the relevant Schedule, which may be subject to future amendments or notifications. This introduces a dynamic element, requiring stakeholders to stay updated. * Interaction with Other Provisions: The cross-referencing to sections 200(5), 201(2), etc., presumes familiarity with the new Bill's structure. Taxpayers and professionals must exercise diligence to ensure correct interpretation and application. * Threshold Calculation: The computation of "adjusted total income" for threshold purposes must be strictly as per the formula and inclusions/exclusions specified, to avoid disputes. * Potential Overlap: In some cases, taxpayers may f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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