Section 206 of the Income-tax Act, 2025 — Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT)

In plain language

Section 206 of the Income-tax Act, 2025 is India's consolidated "minimum tax" provision. It merges into one section what the old Income-tax Act, 1961 spread across several sections — Section 115JB (MAT for companies), Section 115JC (AMT for non-corporates) and the connected credit and definition provisions (115JAA, 115JD, 115JE, 115JF). The idea is simple: even if a taxpayer legally brings its taxable income down to a very low figure using deductions and incentives, it must still pay a minimum amount of tax.

What Section 206 means in plain English

Companies and businesses often show healthy profits in their financial statements but pay little or no income tax because the tax law allows deductions, accelerated depreciation and incentives. Section 206 says: compare your normal tax with a minimum tax computed on a broader base, and pay whichever is higher.

• For companies (MAT): the base is "book profit" — the net profit in the statement of profit and loss, adjusted upward for items like income-tax provisions, transfers to reserves and deferred tax, and downward for items like withdrawals from reserves and brought-forward book loss or unabsorbed depreciation (whichever is lower).
• For non-corporates (AMT): the base is "adjusted total income" — normal total income increased by the specified profit-linked deductions (broadly, Chapter VIII-C deductions, similar to the old Chapter VI-A heading C incentives and the SEZ deduction) that were claimed.

Rates from Tax Year 2026-27 (after the Finance Act, 2026)

• MAT on companies: 14% of book profit — the Finance Act, 2026 reduced the rate from 15% to 14% with effect from 1 April 2026. Surcharge and 4% health and education cess apply in addition.
• Units in an IFSC (like GIFT City) deriving income solely in convertible foreign exchange: 9%.
• AMT on LLPs, firms, individuals, HUFs, AOPs/BOIs claiming specified deductions: 18.5% of adjusted total income.
• AMT on co-operative societies: 15%; non-corporate IFSC units: 9%.

Who Section 206 applies to — and who escapes it

• MAT applies to companies taxed under the regular (old) corporate regime whose normal tax is below 14% of book profit.
• MAT does NOT apply to companies that have opted for the concessional regimes — Section 200 (22% rate, old 115BAA) or Section 201 (15% for new manufacturing companies, old 115BAB) — or to specified income of life insurance business; foreign companies without a taxable presence are also broadly kept out, consistent with the position under the 1961 Act.
• AMT applies to non-corporate taxpayers only if they claim the specified profit-linked deductions. Crucially, for individuals, HUFs, AOPs, BOIs and artificial juridical persons, AMT does not apply at all if adjusted total income is ₹20 lakh or less.
• Persons who opt for the default new personal tax regime (which strips out most such deductions anyway) are effectively outside AMT.

The big change: MAT credit after the Finance Act, 2026

This is where Section 206 now differs sharply from the old Section 115JB regime:

• No fresh MAT credit: from Tax Year 2026-27, MAT paid by a domestic company in the old regime is treated as a final tax — the credit-generating clauses of Section 206 were omitted by the Finance Act, 2026, so no new MAT credit accrues.
• Old credit is preserved but restricted: MAT credit accumulated up to 31 March 2026 is protected through transitional provisions (Section 206 read with the repeal-and-savings provision in Section 536), but reported commentary indicates it can be set off only if the company shifts to the Section 200 concessional regime, and only up to 25% of the tax payable for that year, with the balance carried forward.
• AMT credit continues: for non-corporates, excess AMT over normal tax remains creditable and can be carried forward for up to 15 tax years, usable in years when normal tax exceeds AMT. No interest is paid on this credit.

How it interacts with other provisions

• Sections 200 and 201 (concessional corporate regimes) are the "exit doors" from MAT — opt in, and Section 206 MAT stops applying.
• Chapter VIII-C deductions are the trigger for AMT — no specified deduction claimed, no AMT exposure.
• Section 536 (repeals and savings) carries forward rights, including pre-2026 MAT/AMT credit, from the 1961 Act into the 2025 Act framework.
• All other provisions of the Act (advance tax, interest, returns) continue to apply to a taxpayer covered by Section 206, as under the old Section 115JE.

Practical implications for taxpayers

• Companies still in the old regime should re-run the numbers: with MAT now a final cost (no credit), staying in the old regime purely to use incentives has become more expensive, and migrating to Section 200 may be the only route to use legacy MAT credit.
• LLPs and firms claiming incentive deductions must compute AMT every year and obtain the prescribed accountant's report before filing the return.
• Small individual taxpayers rarely face AMT because of the ₹20 lakh adjusted-total-income threshold and the shift to the new regime.
• Book-profit computation is technical — items like deferred tax, revaluation reserves and Ind AS transition adjustments need careful handling; professional review is strongly advised.