AMT is a parallel tax computation for every assessee other than a company. Where profit-linked or investment-linked deductions cut the normal tax below 18.5% of Adjusted Total Income, the assessee pays AMT instead — and carries forward the difference as AMT credit for up to 15 years.
Last updated: 10 September 2026
Alternate Minimum Tax (AMT) is a parallel tax computation that applies to every assessee other than a company. It is governed by Section 206(2) of the Income Tax Act 2025. Its purpose is to ensure that non-corporate taxpayers who substantially reduce their liability by claiming profit-linked or investment-linked deductions still contribute a minimum level of tax.
AMT is the non-corporate counterpart of Minimum Alternate Tax (MAT), which applies to companies. Where MAT is charged on “book profit”, AMT is charged on “Adjusted Total Income”.
AMT applies only when both of the following conditions are satisfied for the tax year:
If the total income is ₹20,00,000 or less, AMT never applies — whatever deductions have been claimed. The ₹20 lakh threshold is a hard gate, not a graded relief.
An assessee who opts for the new regime is outside AMT — but any AMT credit standing to their account from earlier years lapses on exercising that option and cannot be revived.
Under Section 206(2), the income tax payable by the assessee is the higher of: (a) the tax liability computed under the normal provisions of the Act; or (b) the applicable AMT rate on the Adjusted Total Income (ATI).
| Assessee | AMT Rate on ATI |
|---|---|
| Any non-corporate assessee (general rate) | 18.5% |
| Unit in an International Financial Services Centre (IFSC) deriving income solely in convertible foreign exchange | 9% |
| Co-operative society | 15% |
To the AMT so computed, surcharge (if applicable) and health and education cess at 4% are added.
ATI begins with the total income computed under the normal provisions and adds back the specified deductions that AMT is designed to neutralise.
| Total income as per normal tax computation | XXX |
| Add: Deduction claimed under Section 46 | XXX |
| Add: Deduction claimed under Sections 138 to 152 (except Section 149) | XXX |
| Less: Depreciation under Section 33 that would have been allowed had the Section 46 deduction not been claimed | (XXX) |
| Adjusted Total Income | XXX |
Where AMT is paid in a year because it exceeds the normal tax, the excess is available as AMT credit, to be set off in a later year in which the normal tax exceeds the AMT of that year.
| Tax liability on Adjusted Total Income (AMT) | XXX |
| Less: Tax liability under the normal provisions | (XXX) |
| AMT Credit | XXX |
An assessee to whom AMT applies must obtain a report from a chartered accountant certifying the computation of Adjusted Total Income and the AMT. The report has to be furnished at least one month before the due date for filing the return of income under Section 263(1).
M/s Turnip LLP is engaged in the export of computer software from a Special Economic Zone (SEZ). It commenced business on 1 April 2020. Its net profit as per the Profit & Loss Account for the year ended 31 March 2027 is ₹330 lakhs, after debiting or crediting the following items:
| Profits and gains of business or profession (as per P&L) | ₹330.00 |
| Add: Depreciation debited in books | ₹25.00 |
| Add: Remuneration to working partners | ₹220.00 |
| Add: Interest to partners in excess of 12% (₹22.5 × 3/15) | ₹4.50 |
| Add: Advertisement in political party souvenir — disallowed u/s 34(2)(c) | ₹2.50 |
| Sub-total | ₹582.00 |
| Less: Depreciation as per Income-tax Rules, 2026 | (₹30.00) |
| Less: Brought forward unabsorbed depreciation u/s 33(11) [allowed while computing book profit u/s 35(e)] | (₹30.00) |
| Book Profit | ₹522.00 |
Allowable partners’ remuneration under Section 35 = 90% of the first ₹6 lakh of book profit + 60% of the balance = ₹5.40 lakhs + (60% × ₹516 lakhs) ₹309.60 lakhs = ₹315.00 lakhs. Since the remuneration actually paid (₹220 lakhs) is lower than this limit, the entire ₹220 lakhs is allowed.
| Book Profit | ₹522.00 |
| Less: Remuneration to working partners actually paid (lower than the ₹315 lakh limit) | (₹220.00) |
| Business Income | ₹302.00 |
| Less: Brought forward business loss of T.Y. 2024-25 | (₹50.00) |
| Gross Total Income | ₹252.00 |
| Less: Deduction u/s 144 (SEZ) — ₹302 × 20/25 × 50% (seventh year of operation) | (₹120.80) |
| Less: Deduction u/s 137 (political party advertisement) — not available to a non-company | ₹0.00 |
| Total Income | ₹131.20 |
| Tax @ 30% on ₹131.20 lakhs | ₹39.3600 |
| Add: Surcharge @ 12% (total income exceeds ₹1 crore) | ₹4.7232 |
| Add: Health and education cess @ 4% | ₹1.7633 |
| Tax liability under normal provisions | ₹45.8465 |
| Total Income (as computed above) | ₹131.20 |
| Add: Deduction claimed u/s 144 | ₹120.80 |
| Adjusted Total Income | ₹252.00 |
| Alternate Minimum Tax @ 18.5% | ₹46.6200 |
| Add: Surcharge @ 12% (ATI exceeds ₹1 crore) | ₹5.5944 |
| Add: Health and education cess @ 4% | ₹2.0886 |
| Tax liability u/s 206(2) | ₹54.3030 |
Since the tax under the normal provisions (₹45.8465 lakhs) is lower than the AMT (₹54.3030 lakhs), the Adjusted Total Income of ₹252 lakhs is deemed to be the total income and the tax payable for T.Y. 2026-27 is ₹54.3030 lakhs.
| Tax liability u/s 206(2) | ₹54.3030 |
| Less: Tax liability under the normal provisions | (₹45.8465) |
| AMT credit to be carried forward u/s 206(2)(e) | ₹8.4565 |
The AMT credit of ₹8.4565 lakhs can be carried forward for up to 15 tax years and set off in any later year in which the normal tax exceeds the AMT of that year.
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