Minimum Alternate Tax (MAT)

MAT was introduced in Section 115JB of the IT Act, 1961 to prevent "zero tax companies" — large corporations with substantial book profits that paid no income tax by using exemptions and deductions. MAT is computed at 15% of book profits (as per the company's audited P&L), and if this amount exceeds the regular tax, the company pays MAT. The excess MAT over regular tax becomes "MAT credit" that can be offset against regular tax in subsequent years (up to 15 years). The IT Act, 2025 reduces MAT to 14%, and crucially, bars the generation of new MAT credit from April 1, 2026 — signalling a policy intent to eventually phase out MAT altogether as India moves toward a cleaner concessional corporate tax rate of 22%.