With reference to Minimum Alternate Tax MAT consider the following statements 1 It is applied on tho...........

Economic Affairs Tax System

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With reference to Minimum Alternate Tax

(MAT), consider the following statements:

1. It is applied on those companies which

show zero or negligible income to avoid

tax.

2. It is only applicable to private

companies and not on public companies.

3. It is applied on the book profits of the

companies at the rate of 18.5%.

Which of the statements given above is/are

correct?

1 and 2 only

1 and 3 only

3 only

1, 2 and 3

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Explanation:

Minimum Alternate Tax (MAT) is a tax effectively introduced in India by the Finance Act of 1987, to facilitate the taxation of ‘zero tax companies’ i.e., those companies which show zero or negligible income to avoid tax. Under MAT, such companies are made liable to pay to the government, by deeming a certain percentage of their book profit as taxable income.

MAT is applicable to all corporate entities, whether public or private. MAT is levied at the rate of 18.5% of the book profits.