Section 115JD Of Income Tax Act: Definition, Deductions, Applicability, Taxation & Provisions

One of the primary sources of revenue for the Indian Government is the tax paid by individuals, companies and others. To reduce tax evasion and encourage tax payment, the Indian Government provides benefits in the form of exemptions and deductions to the taxpayers. However, few companies took advantage of such deductions and became zero-tax-paying units.

Therefore, to maintain a balance between levying tax on zero tax-paying units and allowing deductions, the Alternate Minimum Tax (AMT) was introduced under Section 115JD of the Indian Income Tax Act. This article shall discuss Section 115JD in detail, its applicability and the provisions considered.

What Is Section 115JD?

When the regular tax amount falls short of AMT liability, Section 115JD of the Income Tax Act discusses the application of an Alternate Minimum Tax (AMT). AMT credits come into play to rectify any disparity between tax paid by a standard taxpayer and AMT.

The Income Tax Act of 1961 introduced Section 115JD to offer respite to specific taxpayers holding accumulated long-term capital gains (LTCG) who aspire to transform their capital assets into new ones. Moreover, this section empowers taxpayers to actively seek tax credits for the taxes they've paid on LTCG, provided they adhere to specific conditions. 

Applicability Of Section 115JD Of Income Tax Act 

Section 115JEE - The following list showcases the applicability of Section 115JD of the Income Tax Act 1961 as governed by AMT rules.

• When the collective adjusted income surpasses Rs 20 lakh for households, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), or Bodies of Individuals (BOIs).
• Irrespective of the total revenue generated by a business, it remains distinct from any other entity.
• This condition applies exclusively to taxpayers falling within the previously mentioned categories.
• When a taxpayer seeks a reduction according to Sections 80H and 80RRB (excluding Section 80P).
• If a taxpayer claims a deduction as per Section 35AD.
• When a taxpayer claims a deduction under Section 10AA.

Tax Under Section 115JD

The tax rate Under Section 115JD or alternate minimum tax is provided below.

• If the adjusted total income is up to Rs.1 crore, the alternate minimum tax applicable, including surcharge and cess for a cooperative society or firm, is 19.24%, and for a non-cooperative assessee, it is 19.24% ( tax of 18.5% + cess of 4%).
• If the adjusted total income exceeds Rs.1 crore, firms or cooperative societies have a tax rate of 21.5488% (tax of 18.5% + surcharge of 12% + cess of 4%) applied.

Provisions Of Section 115JD Of Income Tax Act

There are different provisions applicable under Section 115JD. For the financial year 2023-24, corresponding to AY 2024-25, the provisions are as follows.

• Section 115JD(1)

Individuals who have fulfilled their tax obligations under Section 115JC are entitled to claim tax credits in accordance with the provisions outlined in this section.

• Section 115JD(2)

The excess amount paid as alternate minimum tax over and above regular income tax liability for a specific assessment year will be added to the tax credit mentioned in subsection (1). 

The admissible tax credit against the taxpayer's standard income tax liability will be determined, ensuring it does not exceed the credit available against any income tax paid in a foreign country or designated territory outside India under sections 90, 90A, or 91. This credit is permissible against the alternate minimum tax liability.

• Section 115JD(3)

No interest shall be levied on the tax credit granted under subsection (1).

• Section 115JD(4)

The amount of the tax credit computed under paragraph (2) is carried forward and offset in line with the rules of subsections (5) and (6). However, such carry-forward is only permitted for the first fifteen assessment years after the assessment year for which the tax credit was granted under subsection (2).

• Section 115JD(5)

In any given assessment year where the standard income tax liability exceeds the alternate minimum tax, the tax credit may be utilised to offset the difference between the regular income tax and the alternate minimum tax, with any remaining tax credit being carried forward.

• Section 115JD(6)

Any alteration in the amount of regular income tax or alternate minimum tax, as per orders made under this Act, shall also impact the tax credit entitlement under this section.

• Section 115JD(7)

Individuals who opt to pay tax under the new regime under section 115BAC(1A) and co-operative societies under section 115BAD or 115BAE are not required to calculate and pay taxes as per the provisions of section 115JC and are also not eligible for tax credits under section 115JD.

The stated provisions collectively aim to provide taxpayers with a fair and flexible system for managing their tax liabilities under different circumstances.

Example

If a LLP has a net profit as per profit and loss account relating to the year ended on 31/03/2024 Rs 100 Lakhs and paid Rs 2 Lakhs as advertisement published in the souvenir released by BJP. A deduction of Rs 50 Lakhs is also available to the LLP. Compute the tax liability.

AMT Credit can be carried forward till the next 15 AYs.

Report From Chartered Accountant

All the taxpayers to whom the provisions of Alternative Minimum Tax are applicable should obtain a report from a Chartered Accountant in Form 29C. It is the report under Section 115JC of the Income Tax Act Under this report, the CA would certify that the Adjusted Total Income and AMT are calculated as per the provisions of the Income Tax Act.

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