MAT TAX situation


If I hold and sell shares after one year… and gain profit …it is tax free as per LTCG

this is good , if im doing shares in Personal or HUF Account

however, if the shares are brought under my company, then MAT is applicable of around 18.5%, is there a way out to avoid that ? or any rules pertaining to it to avoid it ?

One option you may have is to sell stocks underwater so you can net off capital gains. Typically bonus stripping is a strategy ( i.e buy stocks that are issuing bonus shares and then sell the non-bonus stocks after issues of bonus shares, when prices come down. That creates a tax loss)

If it had been an LLP then MAT will not have been applicable.

However note that MAT is a tax asset, so you can set it off against future tax payables. To the extent the company has tax payable against dividend income some part of MAT may get utilised.

In order to save revenue on account of companies converting to LLP’s to take benefits of tax exemptions and to rationalize taxation of LLP’s with companies, this Union Budget has proposed to introduce a new Chapter XII-BA under the Income Tax Act 1961 which provides for levy of Alternate Minimum Tax @ 18.5% on the adjusted total income of Limited Liability Partnerships. The effective rate of AMT after taking in account education cess will be 19.05%. As per the provisions of the chapter XII-BA, where the regular income tax payable by a LLP for a particular financial year is less than the corresponding alternate minimum tax computed at the rate of 18.5% on its adjusted total income; such alternate minimum tax shall be deemed to be the income tax liability of such LLP. Adjusted total income shall be the total income as increased by the deductions claimed under any section included in chapter VI-A ( C ) (deductions in respect of certain income) and deductions claimed under section 10AA (deduction available to SEZ units).

For computation of AMT, Capital Gains and Dividend Income are out of the ambit of Adjusted Total Income of LLP.

As you state, Adjusted Total Income is

Thus Capital Gains and Dividend Income, not being deductions, are not part of AMT calculations.

I am a Managing Partner in an LLP and we file IT Returns with AMT exlcuding the above. Atleast till last year and I have not seen it change for FY 18. If you think otherwise, please let me know with some relevant source. Would be much appreciated.


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Let’s say we are issued 1:1 bonus. Shouldn’t the cost base be divided so that each share’s purchase price is half. Or can we have cost base of one share at purchase price and the other as zero as we got it for free?

The tax rules are such that the shares pre bonus are at cost and post bonus is free.

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