LTCG-Only LLPs Hit by 18.5% AMT What Happened?
The Income Tax Bill 2025 has triggered confusion among LLPs with only long-term capital gains (LTCG-only LLPs). A drafting slip unintentionally pushes such LLPs under 18.5% Alternate Minimum Tax (AMT) — contradicting existing tax policy.
Good news: The Government has confirmed it’s a drafting error and an amendment will restore the AMT exemption soon.
Legal Background: How AMT Applies to LLPs
- What is AMT?
AMT ensures entities claiming large deductions pay a minimum tax. - Who is normally exempt?
LLPs with only capital gains income were generally outside AMT scope. - What changed?
The draft Bill’s wording inadvertently removed this carve-out, exposing LTCG-only LLPs to AMT.
🔗 Reference: Read the draft Bill here (mof.gov.in)
How This Impacts LTCG-Only LLPs
| Particulars | Before Drafting Slip | As per Draft Bill 2025 |
|---|---|---|
| Applicability of AMT | Not applicable to LTCG-only LLPs | Applicable at 18.5% on adjusted total income |
| Tax Burden | Only normal LTCG tax (10% or 20%) | Higher tax due to AMT override |
| Relief Available | Exemption intended | Govt to restore by amendment |
Government’s Clarification
- The Ministry of Finance has acknowledged this as a drafting oversight.
- An official amendment will reinstate the AMT exemption for LTCG-only LLPs.
- Until then, taxpayers should plan based on the original policy intent.
Expert View: What Should LLPs Do Now?
👉 Consult your tax advisor before planning distributions or advance tax payments.
👉 If you fall under this unintended AMT, keep records — likely refunds may follow once the law is fixed.
👉 Stay updated with CBDT notifications and clarifications.
Key Takeaway
- Don’t panic: LTCG-only LLPs are not the target.
- Government fix is underway: Amendment to remove unintended AMT is expected soon.
- Professional advice is essential: Tax planning must factor in current draft and upcoming amendment.
FAQ
1️⃣ Will AMT definitely not apply to LTCG-only LLPs?
The policy intent is clear: such LLPs are not meant to pay AMT. An amendment will clarify this legally.
2️⃣ Should I pay AMT now or wait?
Discuss with your CA — you may pay under protest or adjust payments based on expert advice.
3️⃣ When will the amendment come?
No fixed date yet, but officials indicate it will be moved before the next Budget session ends.
Summary
LTCG-only LLPs face unexpected 18.5% AMT under Income Tax Bill 2025 due to a drafting slip. Govt confirms it’s an error and will restore exemption soon. Get details and expert advice at Efiletax.