Profit After Tax (PAT)

Profit After Tax (PAT) shows the profit remaining after a company accounts for its tax expense. It helps investors compare profitability across reporting periods and understand how much reported profit remains after tax.

• PAT equals PBT minus tax expense
• Positive PAT indicates post-tax profit
• Negative PAT indicates post-tax loss
• PAT margin compares profit with revenue
• ₹2.25 crore on ₹10 crore equals 22.5%
• PAT requires supporting financial metrics

PAT alone does not establish whether a company is financially strong. Investors should examine revenue, cash flow, margins, debt, exceptional items, and return ratios before making an investment decision.

Profit After Tax is the profit left after a company deducts its tax expense from Profit Before Tax (PBT). It appears near the bottom of the statement of profit and loss and represents reported earnings after tax.

The basic relationship is:

PAT = Profit Before Tax − Tax Expense

Profit before tax already reflects applicable operating expenses, depreciation, finance costs, and other income or expenses recorded before tax.

PAT is also commonly referred to as net profit after tax or net income after tax. Companies can use different terminology in their financial statements, so investors should compare the same line item across reporting periods.

PAT does not mean the entire amount is distributed to shareholders. A company can retain earnings for expansion, working capital, debt repayment, capital expenditure, or other business requirements.

Profit After Tax is calculated by deducting tax expense from profit before tax. A simplified calculation starts with income, accounts for expenses before tax, and then subtracts the tax expense.

The calculation can be written as:

Profit before tax = Total income − Expenses before tax

PAT = Profit before tax − Tax expense

Example of PAT calculation

Consider an illustrative investor, Meera, who is reviewing the annual financial results of a company.

Meera calculates PAT as:

PAT = ₹3 crore − ₹75 lakh

PAT = ₹2.25 crore

The ₹75 lakh tax expense in this example is an assumed figure for illustration. It does not represent the tax liability of every company.

Actual financial statements can also contain other income, exceptional items, current tax, deferred tax, and accounting adjustments. Therefore, subtracting only operating expenses, interest, and tax from revenue may not always reproduce the reported PAT.

Profit After Tax is important because it shows the reported earnings remaining after tax. Investors can track PAT across several quarters or financial years to understand how profitability is changing.

PAT can help you:

• Track earnings: Compare profit across reporting periods.
• Calculate profit margins: PAT is used to calculate PAT margin.
• Assess earnings growth: Changes in PAT can indicate improving or declining reported profitability.
• Understand shareholder earnings: Profit attributable to equity shareholders influences Earnings Per Share (EPS).
• Review dividend capacity: PAT contributes to the earnings a company can retain or distribute.
• Compare peers: PAT growth and PAT margin can help compare companies within the same industry.

However, higher PAT does not automatically mean the underlying business has improved. Profit can also increase because of lower finance costs, tax adjustments, other income, or one-time gains.

PAT can increase or decrease because of changes in revenue, operating expenses, finance costs, other income, exceptional items, or tax expense.

For example, revenue can increase while PAT falls if expenses rise faster than sales. Conversely, PAT can rise even when the core business is weak if the company records a significant one-time gain.

PAT can also differ depending on whether you review standalone or consolidated financial statements. Standalone results primarily relate to the reporting company, while consolidated accounts incorporate eligible subsidiaries and other entities under applicable accounting requirements.

Investors should therefore examine the reason behind a change in PAT instead of relying only on the final figure.

PAT, Profit Before Tax, and Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) measure profitability at different stages of a company's financial statement.

EBITDA provides a view of earnings before financing costs, tax, depreciation, and amortisation. PBT moves further down the income statement and accounts for expenses before tax. PAT represents reported profit after tax expense.

Each metric has limitations. EBITDA excludes genuine costs such as interest and depreciation. PAT includes more expenses but can be influenced by tax adjustments, other income, and exceptional items.

Using PAT with EBITDA, PBT, cash flow, and return ratios can provide a more complete view of company performance.

Corporate tax affects PAT because tax expense reduces the amount remaining from profit before tax. However, Indian domestic companies do not all pay tax at one uniform headline rate.

For Assessment Year 2026-27, the Income Tax Department lists different rates for domestic companies depending on the applicable provisions and conditions. These include:

• 22% for domestic companies opting for Section 115BAA
• 15% under Section 115BAB for qualifying companies, subject to prescribed conditions
• 25% in specified cases, including qualifying turnover conditions or Section 115BA
• 30% for other domestic companies where the specified concessional provisions do not apply

Companies opting for Section 115BAA or Section 115BAB are subject to a 10% surcharge on income tax. A 4% Health and Education Cess applies to income tax and applicable surcharge. Under Section 115BAA, the resulting effective tax rate is approximately 25.17%, subject to the conditions of the provision.

The statutory rate and tax expense reported in a company's financial statements can differ. Current tax, deferred tax, disallowances, deductions, and other tax adjustments can influence reported tax expense.

For broader fiscal-policy context, you can also read the Union Budget 2026 highlights.

Source: Income Tax Department, Government of India,

Last updated: 22 October 2026.

Investors should analyse PAT as a trend rather than treating one quarter or financial year as sufficient evidence of financial strength.

Consider these six checks:

1. Compare PAT across periods: Look for consistency in profit growth rather than relying on one reporting period.
2. Compare revenue and PAT: Check whether profit growth is supported by business growth.
3. Review PAT margin: A changing margin can show whether profitability relative to revenue is improving or weakening.
4. Identify exceptional items: Separate recurring operating performance from one-time gains or losses.
5. Compare operating cash flow: Large recurring differences between PAT and cash generation deserve closer examination.
6. Use supporting ratios: Review EPS, Return on Equity (ROE), Return on Capital Employed (ROCE), and debt alongside PAT.

Suppose a company's PAT increases from ₹80 crore to ₹100 crore, representing 25% growth. If most of that increase comes from a one-time asset sale, the figure does not necessarily indicate 25% growth in recurring business profitability.

PAT should therefore support your analysis rather than act as a standalone buy or sell signal.

Profit After Tax helps you understand the profit remaining after a company accounts for tax expense. PAT growth, PAT margin, cash flow, exceptional items, and supporting financial ratios can together provide a clearer view of business performance. Since PAT can change because of both operating and non-operating factors, investors should examine the reasons behind each movement.