Written by CA Manoj N. Shetty is a seasoned Chartered Accountant with over 20 years of expertise in direct taxation, corporate restructuring, and litigation support. Renowned for his pragmatic, client-focused approach, he advises businesses across sectors on complex tax matters, compliance strategies, and dispute resolution, combining technical precision with practical business insight. 

Section 115JC of the Income Tax Act mandates the Alternate Minimum Tax (AMT) for non-corporate taxpayers claiming deductions under sections like 10AA or 35AD. If the regular tax is lower than AMT (18.5% of adjusted total income), AMT applies, ensuring a minimum tax liability. 

Section 115JC of the Income Tax Act introduces the concept of the Alternate Minimum Tax (AMT), a safeguard to ensure that non-corporate taxpayers who enjoy deductions and exemptions still contribute a minimum level of tax.

Designed to maintain fairness in the tax system, AMT prevents situations where firms, LLPs, or individuals claim so many incentives that their effective tax becomes negligible.

Much like the MAT for companies, AMT applies to adjusted total income at a prescribed rate, ensuring parity among taxpayers.

What is Section 115JC and Why Does It Exist?

When you practice long enough, you notice a curious pattern in the tax world.

Governments announce a generous deduction or exemption to promote a particular activity, manufacturing in SEZs, setting up cold chains, or investing in backward areas.

Taxpayers naturally plan around it, sometimes so effectively that they pay little or no tax at all.

Section 115JC, introduced by the Finance Act, 2011, is the Income-tax Department’s answer to this phenomenon. It ensures that non-corporate taxpayers who benefit from such incentive provisions still pay a minimum level of tax.

Think of it as a cousin to the well-known Minimum Alternate Tax (MAT) under section 115JB, which applies to companies.

Section 115JC performs a similar function for non-corporate entities like individuals, HUFs, firms, LLPs, AOPs, BOIs, and certain artificial juridical persons.

The principle is simple but powerful:

If, because of tax incentives, your normal tax liability falls below a minimum threshold (calculated on a specially defined “Adjusted Total Income”), you will still have to pay this alternate minimum tax (AMT).

It’s not a penalty; it’s a baseline that is a safeguard that ensures taxpayers contribute a fair share even while legitimately availing themselves of incentives.

Who Does AMT Apply To? and Who Is Exempt?

One of the most common misunderstandings I see in practice is about applicability. Clients assume AMT is a corporate concept or that it applies only to SEZ units. That’s incorrect.

Applies to:

• Individuals, HUFs, AOPs, BOIs, and artificial juridical persons who have claimed certain deductions;
• Partnership firms and Limited Liability Partnerships (LLPs);

Any non-corporate taxpayer who has claimed:

• Deductions under Chapter VI-A (Part C), i.e., sections 80H to 80RRB (other than section 80P);
• Deduction under section 10AA (profits of SEZ units);
• Deductions under section 35AD (specified businesses).

Exemptions and Relaxations:

• Individuals, HUFs, AOPs, and BOIs whose Adjusted Total Income does not exceed ₹20 lakhs are completely outside AMT. This threshold saves small taxpayers from the compliance burden.
• Cooperative societies continue under their own tax regimes; section 115JC does not override their special rates.

So, in essence, if you are a non-corporate entity and you’ve used any of the heavy incentive sections like 10AA, 35AD, or major 80H–80RRB deductions, you must check whether section 115JC affects you.

The Concept of Adjusted Total Income (ATI)

Adjusted Total Income (ATI) is the cornerstone of the AMT computation.

The law defines it as total income before giving effect to AMT, increased by the deductions that reduce normal taxable income but are specified to be “added back” for this purpose.

In practice, ATI =

Total income (after all deductions)

• Deduction claimed under section 10AA
• Deductions under Chapter VI-A (Part C) other than 80P
• Deductions under section 35AD (minus normal depreciation allowed on those assets)
  = Adjusted Total Income

ATI effectively neutralises the impact of certain tax incentives.

Where the regular income tax computation rewards you for undertaking priority activities (say, developing infrastructure or operating a cold storage), the AMT computation reverses that benefit temporarily to ensure you meet a minimum contribution.

The AMT Rate and Its Structure

The statutory rate of AMT is 18.5% of the Adjusted Total Income.

This is the base rate; to this, you add surcharge (depending on income slab and entity type) and health & education cess at the applicable rate.

For units located in an International Financial Services Centre (IFSC) and deriving income solely in convertible foreign exchange, a concessional rate of 9% is available.

These rates have remained stable in recent Finance Acts, though cess and surcharge adjustments occasionally alter the final effective rate.

As always, rates are not set in stone; every Finance Act can modify them.

So while templates and software often carry forward the prior year’s rate, a cautious practitioner always checks the current year’s Finance Act or the CBDT circular before finalising the computation.

Step-by-Step AMT Calculation

Let’s lay it out like we would in an internal working paper:

Step 1: Compute Regular Income-tax Liability

Compute tax as per normal provisions after claiming all allowable deductions and exemptions, your standard tax calculation.

Step 2: Compute Adjusted Total Income (ATI)

Add back:

• Section 10AA deduction (if claimed);
• Deductions under sections 80H–80RRB (Part C of Chapter VI-A), except section 80P;
• Deduction under section 35AD (less normal depreciation).

Step 3: Compute AMT

Multiply ATI by the prescribed AMT rate (usually 18.5%) and add cess/surcharge as applicable.

Step 4: Compare and Decide

If AMT > regular tax liability, the higher amount (AMT) becomes your tax payable.
The difference (AMT- regular tax) is recorded as AMT Credit under section 115JD.

This structure makes it easy to automate within an Excel workbook or tax software.

However, what distinguishes a seasoned practitioner from a novice is the ability to identify adjustments that clients often overlook, particularly add-backs under sections 10AA or 35AD.

Illustrative Example

Consider an LLP engaged in running an SEZ unit.

Now compute AMT:

Adjusted Total Income
= 35,00,000 (regular taxable) + 20,00,000 (10AA add-back)
= 55,00,000

AMT @18.5% = 10,17,500
Add cess @4% = 10,58,200

Now, compare:

• Regular tax: ₹10,80,000
• AMT: ₹10,58,200

Since AMT is lower, the LLP will pay regular tax; no AMT credit arises.

If the figures were reversed (say, a larger deduction under 10AA), the LLP would have to pay AMT and would earn an AMT credit for the excess.

AMT Credit: The Carry-Forward Mechanism (Section 115JD)

Section 115JD ensures that paying AMT is not a dead loss. The excess tax you pay under AMT can be carried forward as a credit for 15 assessment years.

In later years, if your regular tax exceeds AMT, you can set off the earlier credit to the extent of the difference between regular tax and AMT for that year.

However:

• You cannot claim any interest on AMT credit.
• You must maintain a clear year-wise record of credits and their utilisation.
• The credit must be set off before claiming any MAT credit (if applicable to other business arms).

In my practice, we maintain an “AMT Credit Ledger”, a simple three-column schedule that shows the year of origin, amount, and year of expiry. This ensures that credits don’t lapse silently, which happens more often than you’d think.

Compliance: The Often-Ignored Form 29C

Every taxpayer to whom AMT applies must obtain a report from a Chartered Accountant in Form 29C.

This certificate validates the computation of Adjusted Total Income and AMT.

Points to remember:

• The report should be obtained before the due date of filing the return under section 139(1).
• The CA must verify all add-backs, the rate used, and the reconciliation between AMT and regular tax.
• The certificate must be electronically filed with the return.

In assessments, the absence or inconsistency of Form 29C is one of the most common red flags. Even if your computation is perfect, the return can be technically non-compliant if this form isn’t filed properly.

Typical Errors and Audit Observations

Over the years, I’ve reviewed dozens of assessment orders and audit reports involving AMT.
Here are the most frequent errors:

1. Failure to identify AMT applicability, especially for LLPs claiming 10AA or 35AD. Many tax filers think AMT is “only for individuals.”
2. Incorrect computation of ATI, forgetting to exclude depreciation while adding back 35AD, or misapplying 10AA partial deductions.
3. Using the wrong rate: failing to apply the concessional 9% rate for IFSC units or ignoring the surcharge.
4. Non-maintenance of the AMT Credit schedule, leading to loss of credits after 15 years.
5. Omitting Form 29C or using an outdated format.

Such lapses not only increase tax risk but also create procedural penalties and litigation costs that dwarf the original AMT amount.

Strategic Tax Planning with AMT in Mind

A seasoned practitioner doesn’t treat AMT as a nuisance; it’s a planning variable.
Here’s how we approach it strategically:

1. Projection and Sensitivity Analysis: Before the close of every financial year, simulate both computations, like regular and AMT. This helps anticipate whether AMT will trigger and allows advance tax adjustments.
2. Timing of Deductions: For 35AD or similar deductions, consider the timing of capitalisation. If cash flows are tight, deferring deduction by a year could reduce AMT pressure this year while preserving credit potential later.
3. Use of AMT Credit: Where AMT credit exists, plan income recognition or capital gains strategically in future years when regular tax will be higher to absorb that credit.
4. Documentation and File Notes: Always document the logic behind deductions claimed and their treatment under AMT. This pays off during scrutiny; an officer appreciates a neatly documented reconciliation more than a defensive argument later.
5. Client Education: Clients often resent AMT because they think it negates their “incentive.” It helps to explain that AMT is not an additional tax in perpetuity, it’s a timing difference. You pay earlier but can recover through credits later.

Interaction Between AMT and Other Provisions

AMT vs. MAT

• MAT (section 115JB) applies to companies; AMT (section 115JC) applies to non-corporates.
• MAT is based on book profits, while AMT is based on Adjusted Total Income.
• An LLP, for instance, is governed by AMT, not MAT, even though it may prepare audited financials similar to a company.

AMT and Section 115BA/115BAA/115BAB

These corporate tax rate provisions do not directly affect AMT, but in cases where a partnership firm converts into a company, or vice versa, it is essential to re-evaluate which alternate minimum regime applies post-conversion.

Impact of Losses and Depreciation

Unabsorbed losses or depreciation are not “add-backs” unless directly related to deductions under 35AD. Practitioners should clearly identify such linkages to avoid over- or under-stating ATI.

Record-Keeping and Presentation to the Assessing Officer

Presentation matters.

When an AMT issue arises in assessment, clarity of documentation often determines whether the officer accepts your computation or questions it.

Here’s how we prepare a professional submission:

1. Cover Letter: Explains in plain English why AMT applies or doesn’t apply.
2. Computation Sheet: Side-by-side summary — Regular Tax vs. AMT.
3. Add-back Reconciliation: Detailed schedule showing each section reference and figure.
4. Form 29C Copy: Signed and dated by the CA before the filing deadline.
5. AMT Credit Ledger: Year-wise summary.

When you present the numbers this way, assessments conclude faster and often without any additions.

Compliance Checklist Before Filing Return

A disciplined pre-filing checklist avoids 90% of AMT issues:

Such checklists are indispensable, particularly for LLPs where the tax computations often involve multiple layers of deduction interplay.

Legislative Evolution and Amendments Over Time

It’s worth recalling the legislative journey of AMT.

When first introduced by the Finance Act, 2011, the objective was parity: if corporates were subject to MAT, non-corporates enjoying similar deductions should also face a floor tax.

Over the years, Parliament fine-tuned:

• The threshold exemption for individuals and HUFs (₹20 lakhs ATI);
• The concessional 9% rate for IFSC units;
• The extension of the carry-forward period for AMT credit from 10 to 15 years;
• The procedural requirement of electronic filing of Form 29C.

Although AMT adds complexity, it reinforces the principle of horizontal equity, taxpayers with similar economic income should bear a comparable tax burden, even if their deductions differ.

The Philosophy of AMT

Having advised businesses through two decades of policy swings, I view AMT not as an adversary but as a discipline tool.

It prevents aggressive incentive-driven tax avoidance while allowing genuine businesses to enjoy deductions with a deferred benefit through credit.

From a policy perspective, it stabilises revenue for the government without eroding the motivational value of incentives.

From a professional’s perspective, it forces us to maintain transparency and documentation rigor.

Whenever I explain this to clients, I tell them:

“AMT doesn’t take away your tax holiday, it just spreads the timing. You’ll recover it through credits if your business continues to grow.”

That’s a more balanced and mature way to see it.

Final Thoughts and Best Practices for Chartered Accountants

1. Never assume AMT doesn’t apply. Check every return that involves 10AA, 35AD, or 80H–80RRB deductions.
2. Always reconcile ATI. Keep a worksheet that ties back to the audited financials.
3. File Form 29C properly. Even one missing detail can make a return defective.
4. Educate clients early. Include AMT implications in your tax planning notes, not as an afterthought.
5. Maintain AMT Credit Ledger religiously. Credits lapse silently if forgotten.
6. Use AMT strategically. Manage timing of deductions and income to optimise cash flow.

In short, AMT compliance is a blend of precision, timing, and clear communication, hallmarks of good tax practice.

Conclusion

Section 115JC is not an obscure corner of the tax law; it’s a crucial checkpoint for every tax professional advising non-corporate entities that claim deductions or exemptions. It’s a safety net for the exchequer and a discipline test for the taxpayer.

Handled properly, AMT is just another computed number, not a cause for alarm. Handled carelessly, it can turn into needless litigation, penalties, or forfeited tax credits.

For practitioners, mastering the nuances of AMT, its computations, exceptions, and documentation is a hallmark of expertise. It separates a routine tax preparer from a seasoned Chartered Accountant who anticipates, plans, and defends with confidence.

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