Minimum Alternate Tax (MAT) for companies explained

How it works

1. 1.Start with the net profit in the audited profit and loss account (book profit).
2. 2.Make prescribed adjustments (add back income tax, certain reserves; reduce certain items).
3. 3.Compute MAT at 14% of book profit (15% before tax year 2026-27), plus surcharge and cess.
4. 4.If normal tax is lower, pay MAT instead.

MAT credit

Until 31 March 2026, the excess of MAT over normal tax became MAT credit, set off in later years. From tax year 2026-27:

• For domestic companies staying in the old regime, MAT is a final tax. No new MAT credit is created, and accumulated credit cannot be set off.
• Companies that move to the concessional regime can use accumulated MAT credit, capped at 25% of the year's tax liability.
• Accumulated credit still lapses 15 years after the year it arose.

Who is outside MAT

Companies that opt for the concessional 22% regime are not subject to MAT. Since 2026, they are also the only domestic companies that can use old MAT credit, which makes switching more attractive for companies holding large credits.