Question

The minimum tax credit:

a.      Provides that the amount of AMT paid by an individual in one year can be used to offset the regular tax liability of a subsequent year

b.      May not be used to offset any future AMT tax liability

c.      May be carried forward indefinitely as an offset against regular tax liability

d.      All of the above

Answer 1

• Though AMT(Alternate minimum tax) was introduced to collect tax from zero tax companies, it was also with the intention of having consistent flow of tax to public fund.
• Therefore, while AMT is being levied in an Financial year wherein normal tax is lower than AMT, in subsequent financial years wherein AMT is lower than normal tax, AMT paid earlier is allowed to be carried forward and reduced against normal tax to the extent of the difference between normal tax and AMT.

Suppose Normal tax for year 16-17= 6000

Alternate minimum tax for 16-17 = 8000

• Then the tax payer is liable to pay Rs 8000(i.e. AMT).He shall be able to avail a credit of Rs. 2000(i.e AMT- Normal tax).This is called AMT Credit. This can be carried foward only upto 10 Financial years succeeding the financial year in which such AMT is paid.

In the financial year 17-18, if Normal tax = 9000, AMT = 6000. Since the normal tax is higher than AMT, the tax payer is liable to pay Normal tax of Rs 9000.In this case, he can use the AMT CREDIT of year 16-17 Rs. 2000.So Net tax liability is (Rs 9000 -Rs 2000) = Rs 7000/-.

But in the year 17-18, AMT is higher than normal tax and tax payer is liable to pay AMT, then AMT CREDIT cannot be utilised.

Based on above explanation,

• Amount of AMT paid by an individual in one year can be used to offset the regular tax liability of a subsequent year but cannot be used to offset future AMT tax liability
• AMT credit can be carried forward only upto 10 years succeeding the financial year in which such AMT is paid but NOT INDEFINITELY.

So Option A is only valid.