Steps involved in computation of Book Profit under MAT regime are as follows:

(A) Arrive NP as per statement of P/L A/C of the company.

(B) Specific adjustments in case of merger.

(C) Make adjustments pertaining to OCI items.

(D) Adjust the book profit with stipulated exclusion and inclusion.

(E) Net amount of Book Profit for application of MAT rate

Choose the correct sequence from the options given below:

The correct option 1 (A), (D), (B), (C), (E)

Key Points

​Alternative minimum tax (AMT) and its computation of book profit and MAT credit under section 115JB of the Income Tax Act, 1961

Minimum Alternative Tax (MAT) is a provision introduced by indirect tax laws to limit the tax deductions/exemptions otherwise available to taxpayers so that they pay a 'minimum' amount of tax to the government.

Objective of MAT

The objective of introducing MAT is to bring into the tax net "zero-tax companies" that do not pay taxes despite substantial book profits and high dividend payouts due to various tax breaks and incentives under the Income Tax Act.

For Computation of Book Profit, one may proceed as follows: –

Step 1 - Find out net profit [before other comprehensive income (OCI)] as per the statement of profit and loss of the company

Step 2 -Adjustment to Net Profit to Convert it into Book Profit which is given under Explanation 1 to section 115JB(2)

(A) Positive Adjustment Amount to be Added Back if Dedibted to Profit and Loss Account.

(B) Negative Adjustments Amount to be Deducted from Net Profit.