s.115JB — Minimum alternate tax on a company

Currently operative

The rate is eighteen and one-half per cent in sub-section (1) and fifteen per cent by the proviso for an assessment year commencing on or after 1 April 2020. The counterpart in the Income-tax Act, 2025 is section 206(1), where the rate for a company other than an International Financial Services Centre unit is fourteen per cent, the Department's footnote recording the substitution of 14% for 15% by Act No. 4 of 2026 with effect from 1 April 2026. The clauses of section 206(1) that carried the credit forward, clauses (m) to (p), were omitted by the same Act with effect from the same date, so on the face of the text a company paying minimum tax for tax year 2026-27 or later earns no credit at all.

Income-tax Act, 1961

s.115JB

Income-tax Act, 2025

s.206(1)

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

Section 115JB of the Income-tax Act, 1961 provides that where the income-tax payable by a company on its total income is less than a stated percentage of its book profit, the book profit is deemed to be the total income and the tax payable is that percentage of it. The rate in sub-section (1) is eighteen and one-half per cent, reduced to fifteen per cent by the proviso for an assessment year commencing on or after 1 April 2020, and to nine per cent by sub-section (7) for a unit in an International Financial Services Centre deriving income solely in convertible foreign exchange. Sub-section (2) requires the statement of profit and loss to be prepared in accordance with Schedule III to the Companies Act, 2013. Explanation 1 defines book profit as the profit so shown, increased by items lettered (a) to (k) and reduced by items numbered (i) to (viii). Nothing in the current list of reductions refers to a Chapter VI-A deduction, or to section 10AA, section 35AD, section 80-IA, section 80-IB or section 80-IBA; the three clauses that once allowed a Chapter VI-A reduction related to sections 80HHC, 80HHE and 80HHF and are omitted. Sub-sections (2A) to (2C) make further adjustments for a company reporting under the Indian Accounting Standards. Sub-section (4) requires an accountant's report, which rule 40B prescribes as Form No. 29B. Sub-section (5A) disapplies the section to a person who has exercised the option under section 115BAA or section 115BAB.

What the provision does

Charges a company on its book profit where its regular tax falls below the stated percentage of that figure, prescribes the computation of book profit from the audited statement of profit and loss, and requires an accountant's report. Because the list of reductions contains no Chapter VI-A item, a profit-linked deduction such as section 80-IBA leaves the charge untouched.

Threshold questions

Is regular tax on total income lower than the stated percentage of book profit, which is the only trigger
Which rate applies: eighteen and one-half per cent, fifteen per cent for an assessment year from 2020-21, nine per cent for an International Financial Services Centre unit, or fourteen per cent under section 206(1) of the 2025 Act for a tax year from 2026-27
Has book profit been computed from a statement of profit and loss prepared under Schedule III, with the same accounting policies, standards and depreciation as those laid before the annual general meeting
For a company on the Indian Accounting Standards, have the sub-section (2A) other comprehensive income adjustments and the sub-section (2C) transition amount been brought in
Has the accountant's report in Form No. 29B been furnished by the specified date referred to in section 44AB
Has the option under section 115BAA or section 115BAB been exercised, which disapplies the section altogether by sub-section (5A)

The recurring disputes.

Whether a section 80-IBA or section 80-IB(10) deduction reduces book profit

On the text it does not, and the reductions in Explanation 1 contain no Chapter VI-A item. No decision of any High Court or of the Supreme Court on section 80-IB(10) or section 80-IBA against section 115JB could be located, and no CBDT clarification either. The nearest authority is Sankhla Polymers, on section 80-IB generally, where the Karnataka High Court held that section 115JB in no way denies or reduces the benefit given by section 80-IB and answered the question against the assessee; the special leave petitions were dismissed on 15 January 2015, which leaves the judgment standing without a declaration of law under Article 141. On a housing project the Chandigarh Bench dismissed the same contention in Gee City Builders, and that order declined to follow a Mumbai Bench decision cited to it, so the question has been contested at Tribunal level and decided both ways.

The accounting route, which is the assessee's real argument

Because the charge is on book profit, the only substantial argument available to an assessee is that an amount legitimately kept out of the statement of profit and loss is out of book profit, whether or not it would have been deductible under Chapter VI-A. For a developer this runs on revenue recognition. The answers are three: sub-section (2) requires the accounts to be prepared under Schedule III with consistent policies; sub-sections (2A) to (2C) show that where Parliament wanted the accounting figure adjusted it adjusted it expressly; and a treatment that keeps profit out of one year brings it into another, so the argument is about timing rather than about the charge.

Whether the credit is worth anything to a single project company

Section 115JAA allows the credit to be carried forward to the fifteenth assessment year succeeding the year it becomes allowable, and allows set-off only in a year in which regular tax exceeds minimum tax and only up to that excess. A company incorporated for one project accumulates credit through the construction and sale years, has no later year with income, and never uses it, so the charge is a final tax in substance. Whether the credit survives an amalgamation into a profitable group company is not answered by the section: sub-section (7) destroys it on conversion into a limited liability partnership and says nothing about an amalgamation, which the assessee reads as the expression of a single exclusion and the Revenue as the absence of words passing a personal relief. No authority could be located.

The credit under the Income-tax Act, 2025

Clauses (m) to (p) of section 206(1), the counterpart of section 115JAA, were omitted by Act No. 4 of 2026 with effect from 1 April 2026, which is the day the Act came into force, and nothing was inserted in their place. What survives is transitional set-off of credit standing as on 31 March 2026: section 206(3) for a domestic company that has exercised the option under section 200(5) or section 201(2), capped at twenty-five per cent of a year's tax, and section 206(4) for a foreign company, uncapped. A domestic company that has exercised neither option falls inside neither, and its only route is section 536(2)(b), the accrued rights clause, and section 536(2)(l), which points to corresponding provisions that no longer exist. The alternate minimum tax credit for a non-corporate assessee in section 206(2) was not omitted, so the two are now treated differently. The Department's two sets of frequently asked questions on the transition could not be retrieved for this page.

Frequently asked.

Does a hundred per cent deduction under Chapter VI-A reduce book profit?

On the text, no. Explanation 1 to section 115JB(2) lists what is added to and what is reduced from the profit shown in the statement of profit and loss, and nothing in the current list refers to a Chapter VI-A deduction or to sections 10AA, 35AD, 80-IA, 80-IB or 80-IBA. The three clauses that once allowed such a reduction concerned sections 80HHC, 80HHE and 80HHF and are omitted. The annexure to Form No. 29B has no row for such a deduction.

What is the rate, and when did it change?

Eighteen and one-half per cent in sub-section (1), reduced to fifteen per cent by the proviso for an assessment year commencing on or after 1 April 2020. Nine per cent under sub-section (7) for a unit in an International Financial Services Centre deriving income solely in convertible foreign exchange. For a tax year beginning on or after 1 April 2026 the charge is section 206(1) of the Income-tax Act, 2025, at fourteen per cent, the nine per cent rate being unchanged. Surcharge and cess are imposed by the annual Finance Act. Form No. 29B still prints 18.5 per cent in its annexure, which is a form drafting lag and not the rate.

Is the minimum tax recoverable?

Under the 1961 Act it was, through the credit in section 115JAA, carried forward to the fifteenth assessment year succeeding the year it becomes allowable, with set-off only in a year in which regular tax exceeds minimum tax and only up to that excess. Under the Income-tax Act, 2025 the clauses that carried the credit forward were omitted with effect from 1 April 2026, so on the face of the text a company paying minimum tax for tax year 2026-27 or later earns no credit. Brought-forward credit as on 31 March 2026 survives only through section 206(3) for a company that has exercised the option under section 200(5) or section 201(2), capped at twenty-five per cent of a year's tax, or section 206(4) for a foreign company.

Does the section apply to a firm or a limited liability partnership?

No. Section 115JB applies to an assessee being a company. The charge on a person other than a company is alternate minimum tax under section 115JC, at eighteen and one-half per cent of adjusted total income, which adds back the Chapter VI-A Part C deductions by name. The threshold in section 115JEE(2) covers an individual, a Hindu undivided family, an association of persons, a body of individuals and an artificial juridical person, and does not mention a firm, so a firm and a limited liability partnership have no threshold.