Deferred Tax On Mat Credit

In the bucket marked deferred tax are timing differences tax losses and tax credits.

Deferred tax on mat credit.

Under accounting standard as 22 discussed above though mat credit is not a deferred tax asset an expectation regarding future economic benefit arises in the form of the adjustment of the future income tax liability that arises within a specified time period. Mat credit is not a deferred tax asset as per as 22 on accounting for taxes on income issued by icai deferred tax liability or deferred tax asset arises on account of timing differences i e. In this context the following definitions given in as 22 are noted. Mat does not give rise to any difference between book income and taxable income.

As per as 22 deferred tax assets and liability arise due to the difference between book income taxable income and do not rise on account of tax expense itself. Minimum alternative tax is payable under the income tax act. Deferred taxes result from temporary differences between the book value of a company s assets and liabilities and their tax worth. They also may come from timing differences between the recognition of gains and losses in the.

Whether mat credit is a deferred tax asset 4. Section 115jb levies minimum alternate tax mat at 10 of book profits plus surcharge and cess thereon if such tax is higher than the tax payable under the normal provisions of the act. Similarly a tax credit to pay less tax may be given by the government as an incentive rather than a cash grant. 3 for provisions of mat refer sec 115jb of the it act 1961.

Whether mat credit can be considered as a deferred tax asset per as 22. A tax credit scheme is introduced by which mat paid can be carried forward for set off against regular tax payable during the subsequent fifteen years period subject to certain conditions as under when a company pays tax under mat the tax credit earned by it shall be an amount which is the difference between the amount payable under mat and. Mat a brief introduction. Corporate bookkeepers debit and credit deferred tax specific accounts depending on the transaction.

2 whether mat credit can be considered as an asset. In most countries if you made a loss last year you can pay less tax this year on your profits. 2 when ur income is less as per income tax act than the income as per companies act deferred tax liability arises. The differences between taxable income and accounting income for a period that originate in one period and are capable of reversal in one or more subsequent periods.

The concept of mat was introduced to target those companies that make huge profits and pay the dividend to their shareholders but pay no minimal tax under the normal provisions of the income tax act by taking advantage of the various deductions and exemptions allowed under the act.