FinTech Glossary

Overview

Alternative Minimum Tax (AMT) is a tax calculation method designed to ensure that taxpayers who claim multiple deductions, exemptions, or incentives still pay a minimum level of tax. It prevents high-income individuals or entities from reducing tax liability disproportionately.

In the Indian Context

AMT applies primarily to non-corporate taxpayers such as LLPs, partnership firms, and individuals or HUFs who claim certain profit-linked deductions under the Income Tax Act.

It ensures tax parity and restricts aggressive tax planning through incentives.

How AMT Works

In India, the Alternative Minimum Tax is applied to ensure that non-corporate taxpayers who claim certain profit-linked deductions still pay a minimum amount of tax.

Taxpayers must compute tax using both:

1. Normal Income Tax Provisions
2. Alternative Minimum Tax (AMT) using Adjusted Total Income

The higher of the two becomes the final tax payable.

AMT Rates (India)

• 18.5% of Adjusted Total Income (standard rate)
• Plus surcharge and health and education cess, where applicable

Note: Rates remain subject to annual Union Budget updates.