What is Alternative Minimum Tax in India

Preface: This post was originally published in 2022 and has been updated on July 28, 2025, to provide you with the most current and accurate information.

Alternative minimum tax (AMT) was introduced by the Government of India under the Finance Act of 2011. It is an alternate minimum tax to the normal tax that the government levies. The primary purpose of AMT is to make sure the taxpayers do not misuse tax deductions and exemptions. 

It helps the government to ensure that taxpayers do not escape from paying the entire tax amount. In this blog post, we shall understand what is alternative minimum tax in India.

Alternative Minimum Tax Meaning

Alternative minimum tax is a min. tax that is levied as an alternate to the normal tax. It requires individuals and non-corporate entities to calculate their tax liability using the standard method. If their calculated tax liability is less than 18.5%, they must pay a minimum alternative tax set at 18.5% (plus applicable surcharge and cess).

Simply put, the individuals and non-corporate entities must pay higher amount out of the following two amounts:

• Tax liability calculated according to the normal tax system under IT Act 1961.

• AMT at 18.5% rate of adjusted total income (along with applicable surcharge and cess).

AMT Income Tax Applicability

AMT is applicable to the following entities in India:

• Any non-corporate taxpayers

• Any taxpayer who has claimed a deduction between 50% to 100% of profit allocated to units in Special Economic Zones (SEZ) under Section 10AA. 

• Any taxpayer who has claimed a deduction of 100% of capital expenditure incurred in a financial year under Section 35AD. 

• Any taxpayer who has claimed deductions under Section 80H to Section 80RRB (except 80P). It is important to note that this deduction is available only to specific industries.

Taxpayers Exempt from AMT

AMT provisions do not apply to the following taxpayers if their annual income is below Rs. 20,00,000:

• Artificial Judicial Person

• Individual taxpayers

• Hindu Undivided Family (HUF) 

• Body Of Individuals (BOI) 

• Association Of Persons (AOP) 

Tax Rate under Alternative Minimum Tax Section 11JD 

Section 115JD of the Income Tax Act mandates that the AMT must be paid by the taxpayer if their standard tax liability is lower than the tax due under AMT. The difference between the regular tax amount and the tax paid under the AMT system is regarded as the AMT credit.

The tax rates under section 115JD or AMT are as follows:

• In case of adjusted total income up to Rs. 1 cr., the AMT applicable, incl. surcharge and cess for cooperative society/firm, is 19.24%. For a non-cooperative assessee, the AMT applicable is 19.24%, which includes tax of 18.5% and cess of 4%.

• If the adjusted total income exceeds Rs. 1 cr., the AMT tax rate for firms and cooperative societies is 21.5488%. This rate comprises a tax of 18.5%, a surcharge of 12%, and a cess of 4%.

How to Calculate Alternative Minimum Tax?

For alternative minimum tax calculation, you need to follow the steps explained below:

Step 1: Determine the adjusted total income (ATI). To calculate ATI, you need to add back deductions claimed under Sections 80H to 80RRB (with the exception of Section 80P). You must also include deductions under Section 10AA and Section 35AD (reduced by regular depreciation).

Step 2: Now, you need to multiply ATI by AMT rate of 18.5% along with applicable surcharge and cess.

Step 3: Finally, you must compare normal tax and AMT. If the normal tax liability is higher than AMT, you are liable to pay normal tax. However, if the AMT is higher, then you are liable to pay AMT tax rate.

Conclusion

AMT full form in tax is alternative minimum tax. It is a minimum tax imposed as an alternative to the standard income tax. It requires individuals and non-corporate entities to calculate their tax liability using the standard method. If their calculated tax liability is lower than 18.5%, then they must pay an AMT rate at 18.5%, along with the applicable surcharges + cess. To calculate the AMT, you need to first determine your ATI. Once you have the ATI, multiply it by the AMT rate, along with any applicable surcharges and cesses. After calculating this amount, compare it with your normal tax rate. If the normal tax rate is higher, then you should pay that amount. If the AMT is higher, then you should pay the AMT instead. 

Frequently Asked Questions (FAQs)

Q1. Do Hindu Undivided Families (HUFs) need to pay AMT?

A. Yes, HUFs do need to pay AMT if their adjusted total income exceeds Rs. 20 lakh.

Q2. Which Act introduced the concept of AMT in India?

A. The Finance Act 2011 introduced the concept of AMT in India.

Q3. What is the standard rate of AMT?

A. The standard rate of AMT is 18.5% of the adjusted total income.

Q4. Can the AMT credit be carried forward?

A. Yes, the AMT credit can be carried forward for up to 15 assessment years.

Need assistance in calculating your tax liability and filing your income tax return? Connect with Chartered Accountants at Registrationwala for assistance!

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.