19.

1 Genera| Introduct|on
19.2 Sect|on 11SI8: M|n|mum A|ternate 1ax (MA1) - An overv|ew
1here are many of companles whlch show book proflLs as per Lhelr proflL and loss accounL prepared as per
Schedule vl of Lhe Companles AcL, 1936 buL do noL pay any Lax, slnce lncomecompuLed under Lhe provlslons of
Lhe lncome 1ax AcL, 1961 ls elLher negat|ve or |nsuff|c|ent or n||. 1he companles show nll proflL as per Lhe
lncome 1ax AcL, buL however declare dlvldend Lo shareholders wlLhouL paylng any lncome Lax. 1hese
companles are popularly called zero-tax compan|es. ln order Lo brlng such companles lnLo lncome Lax neL,
Mlnlmum AlLernaLe1ax provlslons arelnLroduced ln llnanceAcL, 1998and effecLlvefrom 01.04.1998.
1hls secLlon overr|des other prov|s|ons of lncome1ax AcL.
Sect|on 11SI8 (S): SLarLs wlLh wordlng Save as otherw|se prov|ded |n th|s sect|on, hence all oLher
provlslons of Lhls AcL shall applyLo bookproflL. l.e. AdvanceLax, 1uS, lnLeresL, surcharge eLc.
AppllcableLo acompany.
SecLlon 113!8 ls noL appllcable Lo a forelgn company whlch ls noL havlng ermanenL LsLabllshmenL ln
lndla.
When app||cab|e: 1ax payable under Lhe normal Lax provlslon (as per books of accounLs) |s |ess than
18.30+SC+LC+SPLCof bookproflL.
8ook proflL refers Lo Net prof|t as per Schedu|e VI of Lhe companles AcL, whlch ls carrled Lo balance sheeL
and shown ln shareho|ders fund. Pere Lhe Lerm neL proflL read as proflL and loss approprlaLlon a/c
balanceappear below Lhellne.
neads of |ncome c|ass|f|cat|on ls only for Lax payable under Lhe normal Lax provlslon. lrom Schedule vl
perspecLlve, such classlflcaLlon does noL exlsL. 1he prlnclple of accrual concepL ls applled. lncome of Lhe
year maLched wlLh expenses of Lhe year and all Lhe revenue of Lhe enLlLy should be booked ln proflL and
loss accounL.
Sect|on 11SIAA: 1he excess of Lax pald, over and above normal Lax, wlll be allowed as Lax credlL and
permlLLed Lo be carr|ed forward for ten assessment years succeedlng Lhe A? ln whlch Lhe credlL become
allowable. 1heexcess of Lax pald referred aboveshall beknown as MA1 credlL.
MA1 credlL ad[ustment can Lake place when normal Lax ls more Lhan MA1, provlded adequaLe MA1 credlL
ls avallable.
Converslon of neL proflL lnLo bookproflL ls madebyad[ustments as permlLLed under law.
MA1 ls appllcableonly ln Lhe year, ln whlch book prof|ts ex|st. So, MA1 |s not app||cab|ewhena company
reports |oss.
Sect|on 211(2) of the Compan|es Act, 19S6: CerLaln companles llke lnsurance companles, 8anklng
companles, LlecLrlclLy companles eLc., are allowed Lo prepare Lhelr proflL and loss accounL ln accordance
wlLh Lhe form speclfled ln or under Lhe AcL governlng such class of companles. Pence an opLlon ls
avallable Lo prepare lLs proflL and loss accounLs elLher ln accordance wlLh Lhe provlslons of Schedule vl of
LheCompanles AcL, 1936(or) ln accordancewlLh Lheprovlslons of LheAcL governlng such company.
Any lncome accrulng or arlslng Lo a company from ||fe |nsurance bus|ness wou|d not be sub[ect to MA1
provlslon. {(ketrospect|ve w.e.f. 2000-01)(I|n. Act, 2012)}
/----+m' .| .+am.-

Convers|on of Net rof|t |nto book prof|t

neL proflL as per Schedule vl of Lhe companles AcL
3
Indla kupees DLoslLed ln kural Infra Long 1erm roflL D lvldend lund
xxx
Add|t|on:- Indlan kupeeS DLoslLed + -
1 I Income Lax pald / ayable +
Note: lncome Lax lncludes (l) ulvldend ulsLrlbuLlon 1ax/1ax
on dlsLrlbuLed lncome, (ll) lnLeresL under Lhls AcL, (lll) Surcharge
and (lv) cess. So, SecurlLy LransacLlon Lax, wealLh Lax, lnLeresL
under oLher AcL, penalLy, flne, frlnge beneflL Lax are noL
Consldered.
2 k keserve Lransfer by whaLever name called. +
Note: 8eserve creaLed u/s 33AC ls noL consldered.
Note: 8eserve Lransfer resLrlcLed Lo Lhe exLenL of depreclaLlon
on accounL of revaluaLlon of asseLs.
Note: 1he book proflLs shall be lncreased by Lhe amounL +
sLandlng ln revaluaLlon reserve relaLlng Lo Lhe reva|ued asset
on the ret|rement or d|sposa| of such asset, ln case Lhe same
|s not cred|ted Lo Lhe proflL and loss accounL.{w.e.f. 01.04.2012}
3 S SeL aslde amounL for un-ascerLalned llablllLy. Note: AcLuarlal
valuaLlon ls LreaLed as ascerLalned llablllLy. +
4 D Dlvldend pald/proposed deblLed Lo proflL & loss accounL +
3 L LxpendlLure ln relaLlon Lo secLlon 10, 11, 12 excepL u/s 10(38) +
6 Loss of subsldlary company lf deblLed Lo roflL & loss a/c +
7 k keserve wlLhdrawal credlLed Lo proflL & loss. -
8 I Income ln relaLlon Lo secLlon 10, 11, 12 excepL u/s 10(38) -
9 L Loss broughL forward / buslness loss (or) unabsorbed
depreclaLlon Whlchever ls lower. Note: Conslder absoluLe
value by lgnorlng slgn. -
10 1 1onnage Lax lncome -
11 roflL of slck lndusLrlal unlL -
Deduct|ons:- kellance Infra Long 1ermrof|t
Complled by ChakravarLhl Murall auLhor of ulrecL 1ax Laws - Culck lnslghL"

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12 D DlmlnuLlon ln Lhe value of asseL and provlslon Lhereof.

Lx: rovlslon for bad debLs represenLs provlslon for dlmlnuLlon
ln value of asseL. +
13 D Deferred Lax llablllLy +
14 D Deferred Lax asseL -
13 D DepreclaLlon lncludlng revaluaLlon of an asseL deblLed Lo
proflL & loss accounL +
16 D DepreclaLlon excludlng revaluaLlon of an asseL deblLed Lo proflL
& loss accounL -
xx (xx) xxx
Ad[usted 8ook rof|t xxx
I|ve
Add|t|on and deduct|on:- D
19.3 Sect|on 11SII: A|ternate M|n|mum 1ax extended to a|| assessees {( w.e.f. 01.04.2012)}
AM1 ls app||cab|e to an lndlvldual, Pul, AC, 8Cl wheLher lncorporaLed or noL, lf ad[usted tota| |ncome
exceeds 20|akhs. Pereln afLer referred as speclfled assessee.
Where regular lncome Lax payable under provlslons of lncome 1ax AcL, 1961 ls less Lhan alLernaLe
mlnlmum Lax payable, Lhen speclfled assessee ls llable Lo pay lncome Lax on ad[usLed LoLal lncome. AM1
credlL ls slmllar Lo LhaL of MA1 credlL.
When app||cab|e: 1ax payable under Lhe normal Lax provlslon (as per books of accounLs) |s |ess than
18.30+LC+SPLCof bookproflL.
AM1 cred|t canbe carr|edforwardfor seL-off up Lo a maxlmum perlod of 10assessmenL years succeedlng
LheassessmenL year ln whlch LhecredlL becomes allowable.
No |nterest ls enLlLled on such credlL amounL.
All oLher provlslons remaln appllcable Lo such speclfled assessee. Lx. Advance Lax, lnLeresL u/s 234A,
2348, 234C, penalLy, self assessmenL eLc.
ro forma Computat|on of Ad[usted 1ota| Income
(l) 1oLal lncome before glvlng effecL under Lhls chapLer xll-8A xxx
(ll) Add: ChapLer vl-A - lncome based deducLlon oLher Lhan secLlon 80 xxx
(lll) Add: SecLlon 10AA deducLlon xxx
(lv) Ad[usLed LoLal lncome xxx
Where "tax due" from Lhe prlvaLe company cannoL be recovered, Lhen, every d|rector of Lhe prlvaLe
company at any t|me dur|ng Lhe relevanL prevlous year shall be [olnLly and severally llable.
1he Lerm Lax due lncludes (|) enalLy (||) lnLeresL (|||) Any oLher sum payable under Lhe AcL.
lf dlrecLor proves LhaL Lhe non-recovery cannoL be aLLrlbuLable Lo any gross neglecL, mlsfeasance or
breach of duLy on hls parL ln relaLlon Lo Lhe affalrs of Lhe company, Lhen, provlslons ln Lhls secLlon wlll
noL geL aLLracLed.
19.4 Sect|on 179: L|ab|||ty of d|rectors of r|vate Company |n ||qu|dat|on Amendment (I|n. Act, 2013)}