How AMT could be the tax reform you didn't expect
17 Jan 2025

Imagine you've been enjoying tax breaks, exemptions, and deductions galore. But what if there's a catch?

Enter the Alternate Minimum Tax (AMT)—a hidden safeguard in India's tax system designed to ensure that even those who ride high on tax incentives don't escape the tax net entirely.

This article will decode AMT—what it is, how it's calculated, and why it's crucial for taxpayers, ensuring that no one gets a free ride when it comes to contributing to the nation's kitty.

Who needs to pay AMT?
Applicability

The AMT is applicable to all individuals, HUFs, AOPs, BOIs, and crucially, businesses under the presumptive taxation scheme u/s 44AD, 44ADA, or similar provisions (but not to companies as they are covered under the Minimum Alternate Tax).

If the adjusted total income exceeds ₹20 lakh for non-corporate taxpayers, AMT applies at a rate of 18.5% on such adjusted total income.

Calculating your AMT liability
Calculation

To calculate AMT liability, you first need to determine the "Adjusted Total Income."

This involves adding back specific deductions under sections 80H to 80RRB and for specified businesses under section 35AD to the net income.

The AMT is then 18.5% on this income minus any foreign tax credits.

Ensuring an accurate calculation of adjusted total income is crucial for correctly determining AMT liability.

Claiming credit for AMT paid
Credit mechanism

Taxpayers who have previously paid AMT are eligible to claim a credit for it against their regular tax liability in the following years.

However, this credit can be applied only if their regular tax exceeds the AMT in those subsequent years.

The credit is nonrefundable but can be carried forward for a maximum of 15 years.

Maintaining accurate records and filing claims promptly are crucial for effectively utilizing this benefit.

Compliance requirements for AMT
Compliance

Taxpayers subject to AMT are required to file Form No. 29C.

This form, which outlines the adjusted total income and AMT due, should be submitted along with the annual return before the stipulated due date established by the Income Tax Department.

Failure to comply or mistakes can lead to penalties and accrual of interest on unpaid taxes. Hence, it is crucial to comprehend and accurately meet these obligations.