Section 115JD of ITA, 1961 : Section 115Jd: Tax Credit For Alternate Minimum Tax

Explanation using Example

Imagine a company, ABC Pvt. Ltd., which operates in the manufacturing sector. For the Assessment Year 2022-23, they calculate their regular income tax liability to be ₹50 lakhs. However, under the provisions of the Alternate Minimum Tax (AMT), their tax liability is determined to be ₹60 lakhs. The company pays the AMT since it is higher than the regular tax.

In the next Assessment Year 2023-24, their regular tax liability comes out to be ₹70 lakhs, while the AMT is only ₹65 lakhs. As per Section 115JD of the Income-tax Act, 1961, ABC Pvt. Ltd. can now claim a tax credit. This credit is the excess of the AMT paid over the regular tax in the previous year, which is ₹10 lakhs (₹60 lakhs - ₹50 lakhs).

For the Assessment Year 2023-24, they can set off this credit against the excess of regular income tax over the AMT of the current year, which is ₹5 lakhs (₹70 lakhs - ₹65 lakhs). After setting off, they will still have a balance of ₹5 lakhs (₹10 lakhs - ₹5 lakhs) as a tax credit, which can be carried forward for future years, but not beyond the fifteenth year from the year in which the credit was first allowed.

Note that no interest is payable on this tax credit, and any changes to their tax liability due to orders under the Act will also adjust the tax credit accordingly.