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Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Returns of various Entities excluding Companies

Alternate Minimum Tax for Non-Corporate Assessees

Updated 11 October 2026 · Fact-checked

Alternate minimum tax (AMT) applies to a non-company person who claims Chapter VIII-C deductions or the section 46 deduction. If regular tax is less than 18.5% of adjusted total income, you pay AMT instead. The excess over regular tax becomes credit, carried forward up to 15 tax years.

Understand Alternate Minimum Tax and Tax Liability Rules

Some persons claim deductions that cut their tax to a very low figure. AMT is a floor. It makes sure such a person pays at least a set percentage of a wider income base.

Under section 206(2) of the Income-tax Act, 2025, AMT applies where the regular income-tax of a person, other than a company, is less than the alternate minimum tax. Then the adjusted total income is deemed to be the total income, and tax equals the AMT. Companies are covered by the separate book profit rule in section 206(1).

The provision applies only to a person who has claimed a deduction under any section of Chapter VIII-C (other than section 149) or under section 46. If you claimed none, AMT is not in play.

Adjusted total income is the total income before AMT, increased by those deductions. For section 46, the add-back is the deduction as reduced by depreciation allowable under section 33, as if no deduction were allowed on those assets.

The rate is 18.5% in the general 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 above regular tax is not lost. It is carried forward as credit and set off in later years when regular tax exceeds AMT.

Key rules to remember

When AMT applies
Regular income-tax < AMT → tax payable = AMT
Only for a person other than a company who has claimed Chapter VIII-C (other than section 149) or section 46 deductions.
Adjusted total income
ATI = Total income before AMT + Chapter VIII-C deductions (other than section 149) + [section 46 deduction − depreciation allowable under section 33 as if no deduction were allowed on those assets]
Section 149 deduction is not added back.
AMT rates
AMT = ATI × 18.5% (general); 15% (co-operative society); 9% (IFSC unit earning solely in convertible foreign exchange)
Compute on adjusted total income, not on total income.
AMT credit
Credit = AMT − regular income-tax of that year
No interest is paid on the credit.
Set-off of credit
Set-off in a year ≤ regular income-tax − AMT of that year
Carry forward not allowed beyond the fifteenth tax year immediately succeeding the year the credit becomes allowable.
Exemption for small ATI
Individual, HUF, AOP, BOI or artificial juridical person (section 2(77)(g)) with ATI ≤ ₹20,00,000 → AMT does not apply
The limit is on adjusted total income. It does not cover firms, LLPs or co-operative societies.

How to solve Alternate Minimum Tax and Tax Liability Rules questions

Use this order for any AMT question on a non-company assessee.

  1. 1Identify the assessee. If it is a company, section 206(1) book profit applies instead. Check whether it is exempt: option under section 203(5) or 204(2), tax computed under section 202(1), or a specified fund.
  2. 2Check the trigger: has the person claimed any Chapter VIII-C deduction (other than section 149) or the section 46 deduction? If not, stop.
  3. 3Compute total income before AMT and the regular income-tax on it at the applicable rates.
  4. 4Compute adjusted total income: add back Chapter VIII-C deductions, and the section 46 deduction net of section 33 depreciation as stated.
  5. 5For an individual, HUF, AOP, BOI or artificial juridical person, check whether ATI exceeds ₹20,00,000. If not, AMT does not apply.
  6. 6Compute AMT at the correct rate on ATI and compare it with regular tax.
  7. 7If AMT is higher, tax payable is AMT and credit equals the excess. If regular tax is higher, set off brought forward credit up to regular tax minus AMT.
  8. 8Add surcharge and cess as applicable and state the credit carried forward with its expiry year.

Quickest way: Compare two numbers

When to use it: Use it when the question gives total income, deductions and regular tax, and asks only the tax payable or credit.

  1. Add the eligible deductions to total income to get ATI.
  2. Multiply ATI by the rate and set it beside regular tax.
  3. Higher figure is the tax payable. Any excess of AMT over regular tax is credit.
  4. In a later year, credit used is capped at regular tax minus AMT.

Common mistakes in Alternate Minimum Tax and Tax Liability Rules

  • Applying AMT to every non-company assessee.

    Students remember only the rate and forget the trigger.

    Fix: First confirm a Chapter VIII-C (other than section 149) or section 46 deduction was claimed.

  • Adding back section 149 deduction to ATI.

    Students treat all of Chapter VIII-C alike.

    Fix: Section 149 is carved out in both the trigger and the add-back.

  • Adding the full section 46 deduction without reducing depreciation under section 33.

    The reduction is easy to miss.

    Fix: Add back section 46 deduction less depreciation allowable under section 33, computed as if no deduction were allowed on those assets.

  • Applying the ₹20,00,000 exemption to LLPs, firms or co-operative societies.

    Students generalise the threshold.

    Fix: It covers only individuals, HUFs, AOPs, BOIs and artificial juridical persons under section 2(77)(g). Test ATI, not total income.

  • Setting off the whole credit in one year.

    Students assume credit reduces tax freely.

    Fix: Set-off is limited to regular tax minus AMT of that year.

  • Treating the credit as the full AMT paid.

    Confusing tax paid with credit.

    Fix: Credit is only AMT minus regular income-tax.

Worked examples

Example 1

An LLP, Shree Textiles LLP, has total income of ₹40,00,000 after claiming a Chapter VIII-C deduction (not section 149) of ₹10,00,000. Regular income-tax on ₹40,00,000 is ₹12,00,000. Ignore surcharge and cess. Find the tax payable and the AMT credit.

Show the solution
  1. The LLP has claimed a Chapter VIII-C deduction, so AMT is relevant.
  2. ATI = ₹40,00,000 + ₹10,00,000 = ₹50,00,000.
  3. The ₹20,00,000 exemption does not apply to an LLP.
  4. AMT = 18.5% × ₹50,00,000 = ₹9,25,000.
  5. Regular tax ₹12,00,000 is higher than AMT ₹9,25,000, so AMT does not apply.

Answer: Tax payable is the regular tax of ₹12,00,000. No AMT credit arises.

Example 2

Mehta & Co, a firm, has total income of ₹20,00,000 after claiming a Chapter VIII-C deduction (not section 149) of ₹30,00,000. Regular income-tax is ₹6,00,000. Next year its regular tax is ₹9,00,000 and AMT is ₹7,00,000. Ignore surcharge and cess. Find this year's tax and credit, and the credit set off next year.

Show the solution
  1. ATI = ₹20,00,000 + ₹30,00,000 = ₹50,00,000.
  2. AMT = 18.5% × ₹50,00,000 = ₹9,25,000.
  3. Regular tax ₹6,00,000 is less than AMT ₹9,25,000, so tax payable is ₹9,25,000.
  4. Credit = ₹9,25,000 − ₹6,00,000 = ₹3,25,000.
  5. Next year regular tax exceeds AMT by ₹9,00,000 − ₹7,00,000 = ₹2,00,000.
  6. Set-off is limited to ₹2,00,000, so ₹1,25,000 of credit remains carried forward.

Answer: Tax payable this year is ₹9,25,000 and credit is ₹3,25,000. Next year ₹2,00,000 is set off and ₹1,25,000 is carried forward, subject to the fifteen-year limit.

Exam tips

  • Write the trigger first. Examiners reward stating that a Chapter VIII-C (other than section 149) or section 46 deduction was claimed.
  • Show ATI as a separate line with each add-back, so marks are awarded even if the final figure is wrong.
  • Always state who is exempt. Test ATI against ₹20,00,000 only for the listed non-corporate persons.
  • End with the credit carried forward and its fifteen-year limit. Mention no interest is paid on the credit.
  • Add surcharge and cess only after fixing the tax payable, and say which rates you assume since the question may not give them.

Practice questions from Computation of Total Income, Tax Liability and Filing of Returns of various Entities excluding Companies

Alternate Minimum Tax and Tax Liability Rules in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Alternate Minimum Tax and Tax Liability Rules: frequently asked questions

Who is liable to AMT among non-company assessees?

A person other than a company who has claimed a Chapter VIII-C deduction (other than section 149) or the section 46 deduction, and whose regular tax is less than AMT. Individuals, HUFs, AOPs, BOIs and artificial juridical persons are exempt if ATI does not exceed ₹20,00,000.

What is the AMT rate for an LLP?

An LLP falls under the general case, so the rate is 18.5% of adjusted total income. Co-operative societies pay 15%. IFSC units earning solely in convertible foreign exchange pay 9%.

How long can AMT credit be carried forward?

It cannot be carried forward beyond the fifteenth tax year immediately succeeding the tax year in which the credit becomes allowable. It is set off only when regular tax exceeds AMT, up to that excess.

Does AMT credit earn interest?

No. The Act states that no interest is payable on the tax credit allowed.

Is a report required?

Yes. A person to whom AMT applies must furnish an accountant's report in the prescribed form, certifying that ATI and AMT are computed per the section, before the specified date referred to in section 63.