Companies paying the Minimum Alternate Tax will have to shell out an additional Rs 3,880 crore (Rs 38.80 billion) from the next financial year on account of a revision in MAT rates.
They will have a burden of Rs 3,469 crore (Rs 34.69 billion) because of this and an additional Rs 411 crore (Rs 4.11 billion) due to the inclusion of long-term capital gains arising out of profit on sale of securities for the calculation of book profit from the next fiscal.
While the corporate tax rate is 30 per cent, the rate under MAT has been 7.5 per cent of book profits. Finance Minister P Chidambaram has proposed to increase the rate to 10 per cent.
Besides, he has also proposed to include long-term capital gains arising out of securities in calculating book profits.
Inclusive of the surcharge, the effective MAT rate will go up from 8.42 per cent to 11.22 per cent from FY 06-07.
The calculation of additional burden is based on balance sheets of 1,860 companies which had paid MAT to the tune of Rs 4,152 crore (Rs 41.52 billion) at an average rate of 6.11 per cent on pre-tax profit of Rs 67,930 crore (Rs 679.30 billion) in FY05-06.
If the effective rate goes up to 11.22 per cent, the MAT outgo for them will be higher, at Rs 7,622 crore (Rs 76.22 billion).
These companies posted a profit of Rs 3,668 crore (Rs 36.68 billion) from the sale of investments in FY05-06. If this is included in their book profits, their tax burden will go up further by Rs 411 crore.
Of the 1,860 firms covered here, 574 have carried forward a loss of Rs 18,877 crore (Rs 188.77 billion) as on financial year 2005-06. These companies paid MAT at the rate of 2.55 per cent on the pre-tax profits of Rs 5,962 crore (Rs 59.62 billion).
If one excludes these firms from the sample, the effective MAT for the remaining 1,286 companies works out higher at 6.46 per cent in FY05-06.
Following the increase in the effective MAT rate, 491 companies, which paid tax between 8.42 per cent and 11.21 per cent of the pre tax profits in FY05-06, will also come under the MAT net.
Additional MAT for these companies works out to be Rs 1,048 crore (Rs 10.48 billion) on the profit before tax of Rs 34,596 crore (Rs 345.96 billion).
The group of 1,097 companies which paid MAT in FY05-06 will be hit the most in FY06-07. These companies will have to pay an additional Rs 2,847 crore (Rs 28.47 billion) when the effective rate goes up to 11.22 per cent.
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