CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies
Anvaya Textiles Ltd, a domestic company, has book profit of Rs 5,00,00,000 for tax year 2026-27. Its income-tax payable on total income computed under normal provisions is Rs 40,00,000. Ignoring surcharge and cess, what income-tax is the company liable to pay under section 206?
The company pays Rs 70,00,000. MAT at 14% on book profit of Rs 5 crore is Rs 70 lakh, which exceeds normal tax of Rs 40 lakh, so section 206 deems book profit to be total income and the company pays tax equal to MAT.
- ARs 40,00,000
- BRs 70,00,000Correct
- CRs 75,00,000
- DRs 30,00,000
Explanation
MAT = 14% x Rs 5,00,00,000 = Rs 70,00,000. Normal tax of Rs 40,00,000 is less than MAT, so the company pays MAT of Rs 70,00,000. Using the old 15% rate would wrongly give Rs 75,00,000.
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