Section 115JD of Income Tax Act

Tax planning is a vital aspect of personal and business financial management. For Indian taxpayers, understanding provisions like Section 115JD of the Income Tax Act is essential for optimising tax payments and ensuring compliance. This section specifically deals with Alternative Minimum Tax (AMT) credits, allowing taxpayers to carry forward excess tax paid under AMT provisions and use it in future years when their regular tax liability exceeds their AMT liability.

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Section 115JD is applicable to taxpayers who are liable to pay AMT. This includes:

• Individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), and Bodies of Individuals (BOIs) with an adjusted total income exceeding Rs. 20 lakh.
• Limited Liability Partnerships (LLPs) and companies paying Minimum Alternate Tax (MAT).
• Taxpayers claiming deductions under specific sections such as:
  • Section 10AA: Deductions for Special Economic Zones (SEZs).
  • Section 35AD: Deductions for capital expenditure on specified businesses.
  • Chapter VI-A deductions, excluding Section 80P.

However, taxpayers opting for the new tax regimes under Sections 115BAC(1A), 115BAD, or 115BAE are not eligible to claim AMT credits.

Section 115JD ensures that taxpayers paying AMT can claim the excess tax paid as credit, which can be carried forward for up to 15 assessment years. Here is how the tax is calculated under this section:

1. Calculate regular tax liability under the applicable provisions of the Income Tax Act.
2. Calculate adjusted total income by adding back deductions claimed under specific sections (e.g., Section 10AA, Section 35AD).
3. Apply the AMT rate of 18.5% on the adjusted total income. Add applicable surcharge and cess.
4. Compare the AMT liability with the regular tax liability.
5. If AMT liability is higher, the excess amount becomes an AMT credit, which can be carried forward.

For example, if your AMT liability is Rs. 5 lakh and your regular tax liability is Rs. 3 lakh, the excess Rs. 2 lakh becomes AMT credit that can be carried forward.

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Section 115JD includes seven key provisions that govern the calculation, carry forward, and utilisation of AMT credits:

Section 115JD(1)

Taxpayers who have paid AMT or MAT can claim the excess amount as credit in subsequent years.

Section 115JD(2)

The credit equals the amount by which AMT/MAT liability exceeds regular tax liability.

Section 115JD(3)

No interest is accrued on the AMT credit.

Section 115JD(4)

The credit can be carried forward for up to 15 assessment years.

Section 115JD(5)

AMT credit can only be used in years when the regular tax liability exceeds the AMT/MAT liability.

Section 115JD(6)

Adjustments to the AMT credit are made if tax calculations change due to legal or assessment orders.

Section 115JD(7)

Taxpayers opting for new tax regimes under Sections 115BAC(1A), 115BAD, or 115BAE are not eligible for AMT credit.

Taxpayers eligible to claim AMT credits under Section 115JD include:

• Individuals, HUFs, AOPs, BOIs, and LLPs paying AMT.
• Companies paying MAT under the Income Tax Act.
• Taxpayers under the old tax regime who meet the eligibility criteria.

Note: AMT credit is not available to taxpayers under the new tax regimes.

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Section 115JD of the Income Tax Act plays a crucial role in ensuring fairness in taxation by allowing taxpayers to carry forward excess AMT or MAT paid. This provision helps individuals and businesses optimise their tax liabilities over time, providing much-needed relief and financial flexibility.

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