Direct and Indirect Taxation · Taxation of Individuals (including AMT) and HUF

Alternative Minimum Tax (AMT) under Income-tax Act 2025

Q: Who has to pay AMT under the Income-tax Act, 2025?

A person other than a company who has claimed a Chapter VIII-C deduction (other than section 149) or the section 46 deduction, where regular tax is less than AMT. Individuals, HUFs, AOPs, BODs and artificial juridical persons are outside AMT if adjusted total income is ₹20,00,000 or less.

Q: How do I calculate adjusted total income?

Take total income before applying AMT and add the Chapter VIII-C deductions claimed (other than section 149). Also add back the section 46 deduction, reduced by depreciation allowable under section 33 as if no section 46 deduction was allowed on those assets.

Q: How does AMT credit work?

The excess of AMT over regular tax is allowed as credit, with no interest. You set it off in a year when regular tax exceeds AMT, limited to that excess. It cannot be carried forward beyond the fifteenth tax year after the year it arose.

Q: What is the difference between AMT and MAT?

MAT under section 206(1) applies to companies and is charged on book profit, at 14% for most companies. AMT under section 206(2) applies to persons other than companies and is charged on adjusted total income, at 18.5% in the general case.

Updated 10 October 2026 · Fact-checked

Alternative minimum tax applies to a non-company assessee who claims Chapter VIII-C deductions (other than section 149) or the section 46 deduction. Add those deductions back to total income to get adjusted total income, charge 18.5% (generally), and pay that if it exceeds regular tax. The excess becomes credit, carried forward up to 15 years.

Understand Alternative Minimum Tax (AMT)

Some deductions can bring a person's regular tax very low or to nil. Alternative minimum tax (AMT) sets a floor. Under section 206(2) of the Income-tax Act, 2025, if the regular income-tax of a person other than a company is less than the AMT for that tax year, the person pays tax equal to the AMT.

AMT is not charged on total income. It is charged on adjusted total income. You get this by taking total income before applying AMT and adding back the deductions claimed under any section of Chapter VIII-C (other than section 149), plus the deduction claimed under section 46. For section 46, the add-back is reduced by the depreciation allowable under section 33, as if no section 46 deduction had been allowed on those assets.

AMT applies only to a person who has actually claimed a Chapter VIII-C deduction (other than section 149) or the section 46 deduction. If you claimed none, AMT is not in the picture.

The rate on adjusted total income is 18.5% in any other case, 15% for a co-operative society, and 9% for a unit in an International Financial Services Centre deriving income solely in convertible foreign exchange.

AMT paid is not lost. The excess of AMT over regular tax is allowed as tax credit. You set it off in a later year when regular tax exceeds AMT. This is different from MAT, which is charged on a company's book profit under section 206(1).

Key rules to remember

Adjusted total income: Adjusted total income = Total income (before AMT) + Chapter VIII-C deductions claimed (other than section 149) + section 46 deduction (as reduced by depreciation allowable under section 33); Section 46 add-back is reduced by depreciation allowable under section 33 as if no section 46 deduction was allowed on those assets.
AMT rate: AMT = Adjusted total income × 18.5% (general); 15% for co-operative society; 9% for IFSC unit earning solely in convertible foreign exchange; Use 18.5% unless the question says co-operative society or IFSC unit.
When AMT applies: If regular income-tax < AMT, tax payable = AMT; Applies only to persons other than a company who claimed Chapter VIII-C deductions (other than section 149) or the section 46 deduction.
AMT credit created: AMT credit = AMT − regular income-tax; No interest is payable on the credit. Carry forward is not allowed beyond the fifteenth tax year after the year the credit arises.
Set-off of credit: Credit used in a year ≤ Regular income-tax − AMT of that year; Set-off is possible only in a year when regular tax exceeds AMT, and only up to that excess.
Exclusion for small adjusted total income: Individual / HUF / AOP / BOI / artificial juridical person: AMT not applicable if adjusted total income ≤ ₹20,00,000; Limit is on adjusted total income, not total income.

How to solve Alternative Minimum Tax (AMT) questions

Follow this order for any AMT question. Use the figures the question gives for regular tax. Ignore surcharge and cess unless the question asks for them.

1Check whether the assessee is a company. If yes, AMT does not apply; MAT is the relevant provision.
2Check whether a Chapter VIII-C deduction (other than section 149) or a section 46 deduction was claimed. If none, AMT does not apply.
3Check the exclusions: option under section 203(5) or 204(2), computation under section 202(1), a specified fund, or an individual, HUF, AOP, BOI or artificial juridical person with adjusted total income of ₹20,00,000 or less.
4Compute adjusted total income: total income plus the Chapter VIII-C deductions plus the section 46 add-back (reduced by section 33 depreciation).
5Compute AMT at the applicable rate (18.5% generally) on adjusted total income.
6Compare with regular income-tax. If regular tax is lower, tax payable = AMT and credit = AMT − regular tax. If regular tax is higher, pay regular tax.
7In later years, set off brought-forward credit only up to (regular tax − AMT), and carry the balance forward within the 15-year limit.
8Write a short conclusion: tax payable and credit carried forward.

Quickest way: Three-line AMT check

When to use it: Use in the exam when the question gives total income, the deduction claimed and regular tax, and asks for tax payable.

Adjusted total income = total income + deduction claimed. Check it against ₹20,00,000 for an individual or HUF first.
AMT = 18.5% × adjusted total income.
Tax payable = higher of regular tax and AMT. Credit = AMT − regular tax, only if AMT is higher.

Common mistakes in Alternative Minimum Tax (AMT)

Applying the ₹20,00,000 limit to total income instead of adjusted total income.
Students see 'income' and use the figure already in front of them.
Fix: Add back the deductions first. Test the limit on adjusted total income.
Charging AMT on total income instead of adjusted total income.
Students forget that the add-back is the purpose of the provision.
Fix: Always write the adjusted total income line before computing AMT.
Applying AMT to a person who claimed no Chapter VIII-C (other than section 149) or section 46 deduction.
Students assume AMT is a general minimum tax.
Fix: AMT applies only to a person who claimed those deductions. Check this first.
Setting off the whole brought-forward credit in a year when regular tax exceeds AMT.
Students forget the cap on set-off.
Fix: Set-off cannot exceed regular tax minus AMT for that year. Carry forward the balance.
Mixing up AMT with MAT: using book profit or 14% for a non-company.
The names and mechanics look alike.
Fix: MAT is for companies on book profit under section 206(1). AMT is for other persons on adjusted total income under section 206(2).
Ignoring the 15-year limit on credit carry forward.
Students stop at the set-off rule.
Fix: State that carry forward is not allowed beyond the fifteenth tax year after the year the credit became allowable.

Worked examples

Example 1

Mr Arjun Nair, an individual, has total income of ₹18,00,000 for the tax year after claiming a deduction of ₹12,00,000 under a section of Chapter VIII-C (not section 149). His regular income-tax on ₹18,00,000 is ₹3,00,000. Compute the tax payable and AMT credit. Ignore surcharge and cess.

Show the solution

He claimed a Chapter VIII-C deduction (other than section 149), and he is not a company. AMT is relevant.
Adjusted total income = ₹18,00,000 + ₹12,00,000 = ₹30,00,000.
This exceeds ₹20,00,000, so the exclusion for small adjusted total income does not apply.
AMT = 18.5% × ₹30,00,000 = ₹5,55,000.
Regular income-tax ₹3,00,000 is less than AMT ₹5,55,000, so he pays tax equal to AMT.
AMT credit = ₹5,55,000 − ₹3,00,000 = ₹2,55,000.

Answer: Tax payable is ₹5,55,000. AMT credit of ₹2,55,000 is carried forward, with no interest, up to the fifteenth succeeding tax year.

Example 2

In the next tax year, Mr Arjun Nair's regular income-tax is ₹6,10,000 and his AMT is ₹5,20,000. He has brought-forward AMT credit of ₹2,55,000. Compute tax payable and the credit carried forward. Ignore surcharge and cess.

Show the solution

Regular income-tax ₹6,10,000 exceeds AMT ₹5,20,000, so AMT does not apply this year and he pays regular tax before credit.
Maximum set-off = regular tax − AMT = ₹6,10,000 − ₹5,20,000 = ₹90,000.
Brought-forward credit is ₹2,55,000, which is more than ₹90,000, so set-off = ₹90,000.
Tax payable = ₹6,10,000 − ₹90,000 = ₹5,20,000.
Credit carried forward = ₹2,55,000 − ₹90,000 = ₹1,65,000.

Answer: Tax payable is ₹5,20,000. Credit of ₹1,65,000 is carried forward, within the 15-year limit.

Exam tips

Start every answer with a one-line eligibility check: not a company, deduction claimed, adjusted total income above ₹20,00,000 where relevant. Examiners give marks for it.
Show adjusted total income as a separate line with each add-back listed. Step marks are given here.
In MCQs, watch for traps: a company, a person who claimed no such deduction, or adjusted total income of exactly ₹20,00,000 (AMT not applicable).
For credit questions, always compute the cap (regular tax − AMT) before setting off.
If asked to differentiate AMT and MAT, cover who is covered, base, rate and credit in a short comparison.

Practice questions from Taxation of Individuals (including AMT) and HUF

Alternative Minimum Tax (AMT): frequently asked questions

Who has to pay AMT under the Income-tax Act, 2025?

A person other than a company who has claimed a Chapter VIII-C deduction (other than section 149) or the section 46 deduction, where regular tax is less than AMT. Individuals, HUFs, AOPs, BODs and artificial juridical persons are outside AMT if adjusted total income is ₹20,00,000 or less.

How do I calculate adjusted total income?

Take total income before applying AMT and add the Chapter VIII-C deductions claimed (other than section 149). Also add back the section 46 deduction, reduced by depreciation allowable under section 33 as if no section 46 deduction was allowed on those assets.

How does AMT credit work?

The excess of AMT over regular tax is allowed as credit, with no interest. You set it off in a year when regular tax exceeds AMT, limited to that excess. It cannot be carried forward beyond the fifteenth tax year after the year it arose.

What is the difference between AMT and MAT?

MAT under section 206(1) applies to companies and is charged on book profit, at 14% for most companies. AMT under section 206(2) applies to persons other than companies and is charged on adjusted total income, at 18.5% in the general case.