Definition
Alternate Minimum Tax (AMT)
Alternate Minimum Tax is the equivalent of MAT for non-corporate taxpayers, ensuring that firms and individuals claiming certain deductions still pay a minimum tax.
AMT extends the logic of Minimum Alternate Tax to non-corporate taxpayers such as LLPs, partnerships and individuals who claim specified profit-linked or investment deductions. It levies a minimum tax on their adjusted total income so that heavy use of incentives does not eliminate their tax liability.
As with MAT, any AMT paid above normal tax can be carried forward as credit and set off in future years. Small taxpayers below a threshold and those not claiming the relevant deductions are typically outside its scope.
Related terms
- Minimum Alternate Tax (MAT)Minimum Alternate Tax ensures that profitable companies which reduce their tax to near zero through exemptions still pay a minimum tax on their book profits.
- MAT CreditMAT credit is the excess of Minimum Alternate Tax paid over a company's normal tax liability, which can be carried forward and set off in future years.
- Presumptive Taxation 44ADSection 44AD lets eligible small businesses declare income at a prescribed percentage of turnover instead of maintaining detailed books, simplifying compliance.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.