Section 115JB of Income Tax- Amended in Budget 2016

Section 115 JB of Income Tax- Changed in Spending Plan 2016, Budget Plan 2016 has actually changed the existing Area 115 JB– widely referred to as MAT provision where MAT refers to Minimum Alternative Tax. The function of this provision is to make sure that the business will not have the ability to prevent or divert the tax by diverting the revenues which will cause book revenues but no or little gross income. This article will provide to the existing provision, the amendment by Budget 2016 and will attempt to summarize the causes and effects of such amendment.

Section 115JB Of Income Tax MAT.jpe

Material in this Post.

Existing arrangement of section 115 JB

Section 115 JB is for the business, if tax payable determined as per Income Tax Act is lesser than 18.5% of book revenues determined as per MAT arrangements (based on section 115 JB), then the book earnings so calculated will be thought about as total earnings for the business. In such a case, tax will be calculated @ 18.5% on book revenues. This arrangement is likewise appropriate to foreign companies where such company has a long-term facility (PE) in India, which would require business and financial connection of the company within India.

Amendment by the Budget 2016

The Earnings Tax Act is changed to result list below arrangements under section 115 JB, where this area would not be applicable to

FII (Foreign Institutional Investors) or FPIs( Foreign Portfolio Financiers)

These are relieved from applicability of MAT arrangements.

Business situated in International Financial Solutions Centre

If such a company makes its earnings just in convertible foreign currency, then such business is allowed to pay MAT @ 9%

Foreign business

If the foreign business pleased one of the following requirements

  1. Where the foreign business is citizen of a nation, which has DTAA (Double Tax Avoidance Contract) with India under section 90 or 90 A. In such case, such foreign business does not have PE in India as per the terms of such DTAA.
  2. Or where the foreign business is resident of the country, not having any DTAA with India.However, in such case, the foreign company ought to not be needed to obtain registration under section 592 or section 380 of the Companies Act 2013.

Causes and effects of modification in Section 115 JB by Budget 2016

A committee for Direct tax matters, made a suggestion to change area 115 JB to the impact of non applicability of the exact same to FII and FPI, due to the truth that numerous FIIs and FPIs do not have PE or business in India.Also mentionable truth was that such FIIs and FPIs were covered under section 115 AD, for this reason the application of MAT would have been a double burden on them.

Alteration of the section to not use to FIIs and FPIs, is a significant step which is anticipated to restore the confidence in the stock exchange by attracting them to enter and actively take part in the stock exchange.

Nevertheless the committee did not attend to concerns concerning MAT applicability to foreign company, which left the entire lobby into hest.This could have affected negatively on the stock market and economy as a whole, had they decided to withdraw from Indian Market due to such important step.Hence the area was further revised to exempt foreign company which do not have service location in India or who are not obliged to register under any relevant law.This amendment is stated to have a favorable effect on financiers.


With India paving its method to success in global market, for being a progressive and safe country for investing with revised FDI norms, this amendment to 115 JB can be intended to draw in more foreign investment.

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Section 115JB Of Income Tax MAT.jpe