Section 206
Section 206: Minimum Alternate Tax (MAT) for companies
Section 206 is the Minimum Alternate Tax provision - it stops profitable companies from using deductions and exemptions to reduce their tax liability to near zero, by requiring them to pay tax on a specially-computed "book profit" whenever that figure would produce more tax than the normal computation.
How MAT works
Where, for a company, the income-tax payable on total income computed under the normal provisions of the Act is less than the minimum alternate tax payable for that year, then: the book profit is deemed to be the company's total income for that year, and the company must pay income-tax equal to the minimum alternate tax instead of the normal computation.
The MAT rate
"Minimum alternate tax" is the tax computed on book profit at:
| Company type | MAT rate |
|---|---|
| Unit in an International Financial Services Centre, deriving income solely in convertible foreign exchange | 9% |
| Any other company | 14% (substituted for 15% by the Finance Act, 2026, w.e.f. 1-4-2026) |
What "book profit" means
"Book profit" is the profit shown in the company's statement of profit and loss for the relevant tax year, increased by several specified add-backs where they were debited to that statement, including:
- Income-tax paid or payable and its provision (including interest, surcharge and cess under this Act)
- Amounts carried to any reserves
- Provisions made for unascertained (as opposed to ascertained) liabilities
- Provision for losses of subsidiary companies
- Dividends paid or proposed
- Expenditure relatable to exempt income or non-profit-organisation income
- Depreciation
- Deferred tax and its provision
Frequently asked questions
What is MAT under the Income-tax Act, 2025?
Minimum Alternate Tax, under Section 206, requires a company to pay tax on its book profit (at 14%, or 9% for a qualifying IFSC unit) whenever that figure produces more tax than the normal computation of total income - preventing companies from using deductions/exemptions to reduce tax liability to near zero.
What is the current MAT rate?
14% of book profit for most companies, reduced to 9% for a company operating as a Unit in an International Financial Services Centre that derives its income solely in convertible foreign exchange.
Is book profit the same as the profit in my financial statements?
No - book profit starts from the statement of profit and loss figure but adds back several specified items (like income-tax provision, reserves, unascertained liabilities, and depreciation) if they were debited to that statement.
Do I pay both MAT and normal tax?
No - you pay whichever is higher: the tax computed under the normal provisions of the Act, or the Minimum Alternate Tax on book profit. You don't pay both on top of each other for the same year.
Want this applied to your actual filing, not just explained?
Get your MAT liability computed by our tax teamLast updated 9 September 2026