Minimum Tax Rules in India: Old vs New Law
The focus keyphrase minimum tax rules is gaining attention again—thanks to Clause 206 of the Income-tax Bill, 2025. This clause attempts to align older tax frameworks like MAT (Minimum Alternate Tax) under Section 115JB and AMT (Alternate Minimum Tax) under Section 115JC with new principles of tax harmonisation and standardisation.
Why Clause 206 of the Income-tax Bill, 2025 matters
Clause 206(2)-(5) introduces a new standard for minimum tax computation that aims to:
- Unify disparate tax treatments
- Close planning loopholes across corporate and non-corporate taxpayers
- Ensure every taxpayer pays a minimum effective tax
This clause has implications for companies, LLPs, and individuals claiming certain deductions.
Comparison: Minimum Tax Rules Then Vs Now
| Parameter | Section 115JB (MAT) | Section 115JC (AMT) | Clause 206 (New Bill) |
|---|---|---|---|
| Applicability | Companies only | Non-corporate taxpayers | All taxpayers (including LLPs, companies, others) |
| Base income | Book profit | Adjusted total income | Adjusted total income with broader scope |
| Rate | 15% (plus surcharge & cess) | 18.5% (AMT base rate) | Proposed standard minimum tax rate (to be notified) |
| Key exemption | Foreign cos with no PE in India | Income from eligible startups or IFSC | Uniform base, fewer carve-outs proposed |
| Legal backing | Income-tax Act, 1961 | Income-tax Act, 1961 | Income-tax Bill, 2025 (Clause 206) |
Key Legal Insight
Clause 206(4) introduces a mandate that if your normal tax liability is lower than the minimum tax, then the minimum tax becomes payable, and credit will be allowed against future income. This mirrors the MAT credit mechanism but in a more uniform framework.
Expert View:What Tax Professionals Need to Watch
“The intent is clear—reduce arbitrage. But without clarity on tax credit rules, it may disrupt genuine tax planning,” says a senior partner at a Big 4 firm.
LLPs and startups using deductions (like under Section 80-IAC or 10AA) may face a higher compliance burden if the minimum tax bypasses existing exemptions.
How Should Businesses Prepare?
- Review deduction-based planning under current law
- Model tax computations under the new clause for FY 2025–26 onwards
- Watch for CBDT clarifications and rules specifying thresholds or exemptions
FAQs: Minimum Tax Rules in 2025 Bill
Q1. Will Clause 206 replace Section 115JB and 115JC?
Possibly yes. If enacted, it creates a single minimum tax rule for all taxpayers.
Q2. Will MAT credit under 115JAA still apply?
Transitional rules are awaited. Clause 206 proposes a credit mechanism but lacks clarity on carryforward timelines.
Q3. Does this impact foreign companies?
Yes, if they fall under the specified residency or source criteria in the new Bill.
Minimum tax rules in India are being harmonized under Clause 206 of the 2025 Tax Bill. This clause may replace MAT and AMT with a unified rule impacting LLPs, startups, and corporates alike.
Conclusion: What Efiletax Recommends
The minimum tax rules in Clause 206 aim to make the tax system more equitable but could increase complexity during transition. Taxpayers should proactively assess their exposure and consult professionals.