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

A firm paid AMT under section 206(2) of the Income-tax Act, 2025 in a tax year, creating a credit of Rs 90,000. In a later year its regular income-tax is Rs 5,10,000 and its AMT is Rs 4,80,000. What AMT credit can be set off in that later year, and what is the resulting tax payable?

Credit of Rs 30,000 can be set off, leaving tax payable of Rs 4,80,000. Set-off is limited to the excess of regular tax (Rs 5,10,000) over AMT (Rs 4,80,000). The balance Rs 60,000 is carried forward, subject to the fifteen-year limit.

  1. ARs 30,000 set off; tax payable Rs 4,80,000Correct
  2. BRs 90,000 set off; tax payable Rs 4,20,000
  3. CRs 30,000 set off; tax payable Rs 5,10,000
  4. DRs 60,000 set off; tax payable Rs 4,50,000

Explanation

Set-off is limited to the excess of regular tax over AMT: 5,10,000 - 4,80,000 = 30,000. Tax payable = 5,10,000 - 30,000 = 4,80,000, and Rs 60,000 stays carried forward. Setting off the full Rs 90,000 ignores the cap.

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