New Delhi: Clarifying on the shift from current to the new corporate tax regime, the tax department on Wednesday said that companies opting to pay for a lower tax rate of 22 percent would not be allowed to avail Minimum Alternate Tax (MAT) credit.
These companies would also not be able to carry forward the accumulated additional depreciation of past years in case of shifting to the lower tax regime.
Tax experts said that companies would have to see which regimes suit them depending on their MAT credits, additional accumulated depreciation of past years and future profitability.
“The companies would need to do their maths and see what suits them,” said Rahul Garg, Senior Partner (Tax & Regulatory), PwC India.
In a clarification on Wednesday, the Central Board of Direct Taxes (CBDT) said that the tax credit of MAT paid by the domestic company, exercising the option under section 115BAA of the Act shall not be available consequent to exercising of such option.
“Further, as there is no timeline within which option under section 115BAA can be exercised, it may be noted that a domestic company having credit of MAT may, if it so desires exercise the option after utilizing the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the Ordinance,” the apex decision-making body on direct taxes said.
The government had last month promulgated an ordinance to slash corporate tax to 22 percent from 30 percent with the rider that companies will be able to opt for lower tax regimes only if they do not avail of any exemptions and incentives.
The CBDT circular has also clarified that a domestic company which exercises option for availing benefit of lower tax rate under section 115BBA shall not be allowed to claim set-off of any brought forward loss on account of additional depreciation for an assessment year for which the option has been exercised and for any subsequent assessment year.
“The circular from the Ministry (CBDT) reflects the much-desired responsiveness to provide tax certainty and mitigate tax litigation. The denial of set-off of loss from unabsorbed accelerated depreciation affirms the clear intent of the policymakers on the working of the new tax schemes,” said Gokul Chaudhri, Partner, Deloitte India.