Forfeiture of AMT Credit if a Co-operative Society opts for Section 115BAD

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The co-operative society opting for new taxation regimes of Section 115BAD has been given immunity from the provisions of AMT (Alternate Minimum Tax) . The Finance Bill proposes a consequential amendment to the provisions of Section 115JD relating to AMT Credit that this provision shall not be applicable to a co-operative society opting for new tax regimes of Section 115 BAD. Thus, the AMT credit available with a co-operative society shall lapse on opting the new regime.

As it is clear that no AMT credit shall be available to a co-operative society opting for section 1 15BAD, the co-operative society having an unutilized balance of AMT credit must have been looking for the answers of the most important question – Whether Section 115BAD should be opted if there is a AMT Credit or not?

If a co-operative society has unutilized balance of AMT credit and it contemplates opting for Section 115BAD regime, then it is essential for the co-operative society to make some calculations before doing so in accordance with the following mechanism.

ParticularsAmount
Present value of future tax liability of co-op. society if it does not opt for Section 115BAD [A]xxx

Present value of future tax liability of co-op. society if it opts for Section 115BAD [B]xxx
Present Value of Net Saving (if positive) [C = A –B]xxx

(a) Present value of future tax liability if co-operative society does not opt for Section 11 5BAD

Step 1:       Calculate net tax liability of future years at the current enacted rate assuming that the co-op. society does not opt for Section 115BAD. Such tax outgo shall be calculated till that year in which the AMT credit is fully utilized.

Step 2:       Calculate the present value of net tax liability calculated in Step 1 as per applicable discounting rate.

(b) Present value of future tax liability if co-operative society opts for Section 115BAD

Step 3:       Calculate net tax liability of future years at the nely introduced rate assuming that the co-op. society opts for Section 115BAD. Such tax outgo shall be calculated till the year which has been identified in Step 1 (in which the AMT credit is fully utilized).

Step 4:        Calculate the present value of net tax liability calculated in Step 3 as per applicable discounting rate

(c) Calculate the net savings

Step 5:       Calculate the difference between the figures computed in Step 2 and Step 4. If the result is positive, then the co-op. society should immediately opt for new tax regime of Section 115BAD. If the figure is negative, the co-op. society should defer the decision of opting the regime till that year in which this figure becomes positive.

EXAMPLE:

ABC co-op. society is intending to opt for section 11 5BAD. However, it has unutilized AMT credit of 5 crores as per Income-tax return filed for Assessment Year 2020-21.

The projected adjusted total income and taxable total income of the co-op. society for next 5 years are follows:

Particulars2021-222022-232023-242024-252025-26
Adjusted total Income computed for the purpose of AMT25,00,00,00030,00,00,00035,00,00,00040,00,00,00045,00,00,000
Total Income computed as per normal provisions of the Income Tax Act.14,00,00,00025,00,00,00027,00,00,00028,00,00,00047,00,00,000

Determine whether the co-op. society should opt for section 115BAD from Assessment Year 2021-22?

SOLUTION:

If a co-op. society has unutilized balance of AMT credit and it contemplates opting for Section 115BAD regime, then it is essential for the co-op. society to find the difference between the present value of future tax liability if it doesn’t opt for Section 115BAD and the present value of future tax liability if it opts for Section 115BAD. If the difference is positive then the co-op. society should immediately opt for section 115BAA otherwise not.

In the given example, the calculation shall be done as under:

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