Minimum tax, in one minute
Your accounts show a profit. Your tax computation shows almost nothing, because depreciation and deductions have eaten it. The law's answer is that a profitable business should not pay zero tax, so it sets a floor — a percentage of the wider profit figure, payable regardless.
If you are a company
The floor is called MAT and it is a percentage of your book profit — the profit in your audited accounts, with a few adjustments. Not your taxable income.
Section 115JB, Income-tax Act 1961 · section 206(1), Income-tax Act 2025
If you are an LLP, firm or individual
The floor is called AMT and it applies only if you claim a profit-linked deduction. No such deduction, no AMT — however large your profit is.
Section 115JC · section 206(2)
What you actually pay
The higher of the two: your normal tax, or the minimum. You never pay both. Historically the extra came back later as credit — but for companies that changed this year.
Section 115JAA · section 206(3)
The change that catches people out this year
Until now, paying MAT was a timing problem, not a cost. You paid more today, banked the difference as credit, and set it off in a later year when normal tax was higher. Many companies stayed in the old regime purely to run that credit down.
From FY 2026-27 the Finance Act, 2026 changed three things:
- The MAT rate came down from 15% to 14% of book profit.
- MAT is now a final tax for a company staying in the old regime — the extra generates no credit at all. It is money gone, not money deferred.
- Credit built up to 31 March 2026 survives, but a domestic company can only use it after moving to the 22% regime, capped at 25% of that year's normal tax.
If your company has been sitting on unused MAT credit, that credit is now stranded until you switch regimes. Whether switching is right depends on your numbers over several years — it is worth working out before the year closes, not at assessment.
AMT was left alone. Still 18.5%, still 15% for a co-operative society, and the credit still works exactly as before.
The mistake that costs startups real money
You will find calculators online that offer a startup MAT holiday — the idea that a DPIIT-recognised startup claiming the section 80-IAC three-year holiday is also exempt from MAT. There is no such exemption.
Section 80-IAC takes your normal tax to nil. It does not touch book profit. So a startup in its holiday years, with profits in its accounts, still writes a real cheque for MAT — and founders who budgeted for a zero-tax year are caught short. CBDT has said as much. The provision that once gave SEZ units a MAT exemption was withdrawn years ago and never applied to startups in the first place.
Use the calculator above with your 80-IAC deduction entered and you will see the actual position. For a company the MAT is payable; for an LLP claiming the same deduction it is AMT at 18.5%, which is one reason the choice between an LLP and a private limited company is worth thinking about before incorporation rather than after.
Rates
| Who you are | Applies to | Up to FY 2025-26 | FY 2026-27 onwards |
|---|---|---|---|
| Company — normal rates | Book profit | 15% | 14% |
| Company — 22% or 15% regime | — | No MAT at all | |
| Company in an IFSC | Book profit | 9% | 9% |
| LLP, firm, individual, HUF, AOP | Adjusted total income | 18.5% | 18.5% |
| Co-operative society | Adjusted total income | 15% | 15% |
| Non-company unit in an IFSC | Adjusted total income | 9% | 9% |
Surcharge and 4% health and education cess apply on top of every rate above. Where income only just crosses a surcharge threshold, marginal relief limits the extra — the calculator applies it and shows it separately.
Who is outside it entirely
- A company that has moved to the 22% or 15% concessional regime.
- An individual, HUF, AOP or BOI whose adjusted total income stays within ₹20 lakh. Note this floor does not protect an LLP or a partnership firm — they face AMT at any level.
- Anyone claiming no profit-linked deduction at all. This is most ordinary MSMEs, and it is the single most common reason the answer above comes back "no".
- A foreign company with no permanent establishment in India.
Questions we get asked
My company made a book profit but a tax loss. Do I pay anything?
Very likely yes, and this is the classic MAT situation. A tax loss does not remove book profit, and MAT is charged on book profit. Enter your book profit above with taxable income as zero and you will see the figure.
Is MAT 15% or 14%?
Both, depending on the year. For FY 2025-26 — the return most businesses are filing now — it is 15%. From FY 2026-27 it is 14%. Choose the year at the top and the correct rate is used. The 9% rate for an IFSC unit did not change.
Will I get the extra back as credit?
For FY 2025-26 and earlier, yes — the excess over your normal tax becomes credit you can set off for up to fifteen years. For FY 2026-27 onward, if you are a company on the old rates, no. MAT has become a final tax and no fresh credit arises. AMT credit for LLPs, firms and individuals is unaffected.
I am a small proprietor. Does any of this affect me?
Almost certainly not. AMT only applies if you claim a profit-linked deduction such as 80-IA or 80-IAC, and even then only once adjusted total income crosses ₹20 lakh. Ordinary deductions like 80C and 80D are irrelevant here. Run the check above to confirm.
Should I move to the 22% regime to escape MAT?
It removes MAT, but you give up the deductions and incentives that made your taxable income low in the first place — and from this year it is also the only way to use accumulated MAT credit. It is a genuine trade-off that needs your own numbers across several years. The calculator shows what the 22% rate would cost on your figures as a starting point, not as an answer.
Does the calculator work out my normal tax correctly?
It computes tax on the taxable income you enter, using the rate for your entity type, with surcharge, marginal relief and cess. That is reliable for a straightforward trading business. If your income includes capital gains, foreign income, or anything taxed at a special rate, the estimate will be off — use the box under "My CA already gave me the exact tax figure" and enter the computed amount instead.
Do I need anything filed along with my return?
Yes, where the minimum tax applies. A report from an accountant certifying book profit, historically Form 29B, or adjusted total income in Form 29C, has to be furnished before the specified date. A working from this page is not that certificate.