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CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Return of Companies

Arjun Components Ltd (domestic company, did not opt for the concessional regime under section 200(5) or 201(2)) has book profit of ₹50,00,000 and tax on total income computed under normal provisions of ₹6,00,000. Ignore surcharge and cess. What are the consequences for the tax year under section 206(1) as amended by the Finance Act, 2026?

Tax payable is ₹7,00,000, being 14% of ₹50,00,000, because it exceeds regular tax of ₹6,00,000. Under the amended section 206, the earlier MAT credit provisions were omitted from 1 April 2026, so no fresh credit arises for the ₹1,00,000 excess.

  1. ATax payable ₹7,00,000, and the ₹1,00,000 excess over regular tax is allowed as a credit carried forward
  2. BTax payable ₹6,00,000, with no MAT impact
  3. CTax payable ₹7,50,000, with credit of ₹1,50,000 carried forward
  4. DTax payable ₹7,00,000, with no credit arisingCorrect

Explanation

MAT = 14% × 50,00,000 = ₹7,00,000, exceeding regular tax of ₹6,00,000, so MAT is payable. The text for the 2026 amendment omits the old clauses (m) to (p) giving credit for MAT paid, so no new credit arises on MAT paid; only credit existing at 31 March 2026 is dealt with in sub-sections (3) and (4). Option with ₹1,00,000 credit reflects the repealed credit rule.

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