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Informist, Sunday, Feb. 1, 2026

--BUDGET: Brought-forward MAT credit until Mar 30 will be available to set-off

--BUDGET: Final MAT rate cut to 14% from 15%

--BUDGET: Moot brought forward MAT credit for cos only in new tax regime

--BUDGET: Moot broad forward MAT credit for cos only in new tax regime

HYDERABAD – The Union Budget has proposed reducing the Minimum Alternate Tax rate to 14% from 15% to facilitate companies' transition to the new tax regime. Companies opting for this regime will not be allowed to carry forward or claim MAT credit in future tax years in respect of such payments.

As MAT is proposed to be a final tax, no further MAT credit will accumulate from Apr 1. In line with this change, the final MAT rate has been reduced to 14%, while the MAT credit accumulated up to Mar. 31 will continue to be available for set-off, subject to the prescribed limits. "There shall be no allowance of credit in future tax years in respect of such payment," Finance Minister Nirmala Sitharaman said while presenting the Budget for 2026-27 (Apr-Mar).

The Budget has also allowed the set-off of brought-forward MAT credit accumulated up to tax year 2026-27 (Apr-Mar) only for domestic companies that shift to the new tax regime. "To encourage companies to shift to the new regime, set-off of brought forward MAT credit is proposed to be allowed to companies only in the new regime. Set-off using available MAT credit is proposed to be allowed to an extent of 1/4th of the tax liability in the new regime," Sitharaman said.
 

Such MAT credit available as of Apr. 1 can be set off in the new regime to the extent of 25% of the company's tax liability. The carried-forward MAT credit will remain available for utilisation only up to 15 years from the year in which the credit first arose.

For foreign companies, the Budget proposes that MAT credit set-off will be permitted to the extent of the difference between tax on total income and MAT, but only in those tax years where the normal tax liability exceeds the MAT liability.  End

Reported by Narayana Krishna

Edited by Saji George Titus

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