27 Tax Deductions Now Create MAT Problem !

Budget 2012 has the bad news for any one who is dreaming of claiming tax deductions u/s 10 A or 80HH to 80RR or Section 10A and getting away tax free income .This dream is shattered as the section 115C is substituted by Finance Bill 2012  to provide a law which will make you liable to pay ALT of 18.5 % of adjusted total income if any one of the 27 tax deductions  are claimed .

Under the existing provisions of the Income-tax Act, Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) are levied on companies and limited liability partnerships (LLPs) respectively. However, no such tax is levied on the other form of business organizations such as partnership firms, sole proprietorship, association of persons, etc. Now Budget 2012 , Finance Minister has proposed taxing an entity who by virtue of any claim of tax deductions u/s 10 A or any deduction under section 80 H to 80RR , are not in the tax bracket , shall have to pay alternate minimum tax  .

Alternate Minimums Tax or MAT on  Even Individuals?

Yes, anyone  who claims tax deductions u/s 80H to 80RR will be labile to pay alternate minimum tax @ 18.5 % of adjusted total income. This is provided by substituting section 115C of the Income Tax Act which was previously  applicable only for LLP . The heading of the said section is now “PERSONS OTHER THAN A COMPANY”

Any way out of Alternate Minimums Tax

Only saving grace is that  the provisions of AMT ( Alternate Minimum tax ) under Chapter XII-BA shall not apply to an individual or a Hindu undivided  family or an association of persons or a body of individuals (whether incorporated or not) or an artificial juridical person referred to in section 2(31)(vii) if the adjusted total income of such person does not exceed twenty lakh rupees.

So what are those 27  tax deductions ?

It has been provided that anyone who claims any of the following deduction shall be liable to pay alternate minimum tax @ 18.5 % of adjusted total income.

1.      10A  Special provision in respect of newly established undertakings in free trade zone, etc.

2.      80HH   Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas

3.      80HHA   Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas

4.      80HHB   Deduction in respect of profits and gains from projects outside India

5.      80HHBA  Deduction in respect of profits and gains from housing projects in certain cases

6.      80HHC  Deduction in respect of profits retained for export business

7.      80HHD  Deduction in respect of earnings in convertible foreign exchange

8.      80HHE Deduction in respect of profits from export of computer software, etc.

9.      80HHF Deduction in respect of profits and gains from export or transfer of film software, etc.

10.  80-I  Deduction in respect of profits and gains from industrial undertakings after a certain date, etc.

11.  80-IA Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.

12.  80-IAB Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone

13.  80-IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings

14.  80-IC Special provisions in respect of certain undertakings or enterprises in certain special category States

15.  80-ID Deduction in respect of profits and gains from business of hotels and convention centres in specified area

16.  80-IE Special provisions in respect of certain undertakings in North-Eastern States

17.  80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste

18.  80JJAA Deduction in respect of employment of new workmen

19.  80LA Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre

20.  80-O Deduction in respect of royalties, etc., from certain foreign enterprises

21.  80Q Deduction in respect of profits and gains from the business of publication of books

22.  80QQADeduction in respect of professional income of authors of text books in Indian languages

23.  80QQB Deduction in respect of royalty income, etc., of authors of certain books other than text books

24.  80R Deduction in respect of remuneration from certain foreign sources in the case of professors, teachers, etc.

25.  80RR Deduction in respect of professional income from foreign sources in certain cases

26.  80RRA Deduction in respect of remuneration received for services rendered outside India

27.  80RRB Deduction in respect of royalty on patents

So be ready for paying 18.5 % of alternate minimum tax if you claim any of the aforesaid deduction !