Amendment to Minimum Alternate Tax (MAT) under Finance Act, 2026

We wish to draw your kind attention to a significant amendment made to the Minimum Alternate Tax (MAT) provisions under the Finance Act, 2026, which may have a bearing on your company’s tax position going forward.

• The amendment operates under Section 206 of the Income-tax Act, 2025 (corresponding to Sections 115JB and 115JAA of the erstwhile Income-tax Act, 1961), and takes effect from Tax Year 2026-27, that is, income for the financial year commencing 1 April 2026 onward.

• We would like to clarify at the outset that this amendment does not affect the return currently being filed for Assessment Year 2026-27 (financial year 2025-26), which continues to be governed by the existing Section 115JB provisions at the unchanged rate of 15 per cent.

• The key changes, effective from financial year 2026-27, are as follows:
  • The MAT rate on book profits is proposed to be reduced from 15 per cent to 14 per cent.
  • For companies continuing under the old tax regime, MAT paid is to be treated as a final tax. No fresh MAT credit would be generated on tax paid at the reduced rate from 1 April 2026. The MAT credit accumulated up to 31 March 2026 will continue to be available, but its set-off will be permitted only if the company subsequently shifts to the new tax regime.
  • For companies opting for the new tax regime (corresponding to Sections 115BAA/115BAB of the erstwhile Act) from financial year 2026-27 onward, MAT credit accumulated up to 31 March 2026 may now be set off against the new-regime tax liability, subject to a cap of 25 per cent of that year’s tax liability, and carried forward for up to 15 years from the date each tranche of credit was generated.
  • Companies that had already transitioned to the new regime prior to this amendment, and had accordingly written off their MAT credit, would not be eligible for any retrospective restoration of such credit.

• Since financial year 2026-27 is already underway, and the second instalment of advance tax for the year falls due shortly, we would suggest that companies presently under the MAT framework review their advance tax working to reflect the revised rate and credit position. Companies holding a significant MAT credit balance may also wish to revisit their regime choice in light of the improved credit set-off now available.

• We would add that the position above is based on our reading of the amendment as reported in professional analyses of the Finance Act, 2026. We would recommend a specific verification against the primary text of Section 206 before this is applied to any particular computation, and we would be glad to undertake this exercise for your company if required.

Kindly go through this and let us know for any clarification or assistance required in this regard, including a review of your specific MAT credit position and regime choice for financial year 2026-27.