Income Tax

Alternate Minimum Tax (AMT) on LLP

CA Adityavikram Banka

Alternate Minimum Tax (AMT) on LLP

Introduction to Alternate Minimum Taxation (AMT)

Initially, the concept of MAT, i.e. Minimum Alternative Tax, was introduced only for the companies. However, gradually it was made applicable to all the other taxpayers in the form of AMT, i.e. Alternate Minimum Taxation. Hence it forms a part of the LLP taxation.

  • Difference between MAT and AMT
Particulars MAT AMT
Relevant Section Section 115JB Section 115JC to Section 115JF
Applicability Company Taxable Person, other than the company, claiming deduction under section 80H to 80RRB (except section 80P), or section 10AA or section 35AD.
Taxability MAT is payable on book profit AMT is payable on adjusted total income
Reporting requirement Form 29B Form 29C
  • Applicability of the provisions of AMT to LLPs

Vide Finance Act, 2011, the provisions of AMT were made applicable to the LLP. Provisions of AMT are applicable only in the following cases –

  1. When an LLP has claimed deduction under section 80H to 80RRB (except section 80P).
  2. If an LLP has claimed deduction under section 35AD.
  3. When an LLP has claimed deduction under section 10AA.
  • Threshold exemption under AMT

The provisions of Section 115JEE of the Income Tax Act states that the AMT applies to an Individual, Hindu Undivided Family, Association of Person, Body of Individuals and the artificial juridical person only in case the ‘adjusted total income’ exceed INR 20 Lakhs.

It is important to mention here that the benefit of the threshold exemption is available only to the categories of persons mentioned above.

The benefit of threshold exemption is not available to the partnership firm, LLP and other non-corporate assessee.

  • Rate of AMT

AMT @ 18.50% (plus surcharge and cess as applicable) of the adjusted total income is leviable.

AMT is levied @ 9% (plus surcharge and cess as applicable) in case of a non-corporate assessee being the unit located in IFSC [International Financial Services Centre] and such unit is deriving its income only in convertible foreign exchange.

  • Calculation of Adjusted Total Income

AMT rates are applicable on ‘adjusted total income’ and therefore it is vital to understand the calculation of ‘adjusted total income’. Here’s how –

Particulars Amount
Total taxable income of the LLP XXX
Add – Amount of deduction claimed under section 80H to section 80RRB (except section 80P) XXX
Add – Amount of deduction claimed under section 35AD (reduced by the depreciation allowable as per section 32) XXX
Add – Amount of deduction claimed under section 10AA XXX
Adjusted total income XXX
  • Computation of tax liability

If AMT provisions apply to the LLP, in that case, the LLP tax liability would be calculated as –

Particulars Amount
Tax liability computed as per the normal provisions of the Income Tax Act (A) XXX
Tax liability computed as per AMT provisions (B) XXX
Tax payable by the LLP would be higher of (A) or (B) XXX

It is essential to note here that the LLP is required to pay tax as per AMT only in the Financial Year, wherein, the tax on normal income is lower than AMT on Adjusted total income.

  • AMT credit

If in any year, the LLP pays tax liability as per AMT, then it is entitled to claim AMT credit. The amount of AMT credit would be excess of tax paid as per AMT over the tax payable as per normal provisions i.e., AMT Credit = Tax paid as per AMT provisions – Tax computed as per normal provisions.

The AMT credit can be utilized in the subsequent years. The AMT credit can be adjusted in the year in which the tax payable as per normal provisions is more than the tax payable as per AMT. The utilization of AMT is allowed as follows –

Amount of utilization of AMT credit = Tax payable as per normal provisions (-) Tax as per AMT.

The AMT credit can be carried forward for a period of 15 years immediately following the assessment year in which such credit is generated. If the AMT credit remains unutilized, within a period of 15 years, the pending AMT credit will lapse.

  • Reporting requirements

If AMT provisions apply to LLP, then, the LLP is required to obtain a report in FORM 29C from the Chartered Accountant. The said report certifies that the calculation of adjusted total income and the AMT is as per the applicable provisions.

CA Adityavikram Banka
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