MAT (minimum alternate tax): meaning and 2026 changes
MAT is a minimum tax on a company's book profit. Budget 2026 cut the rate to 14% and made it a final tax from April 2026. It is now in section 206.
Short answer
MAT (minimum alternate tax) is a tax on a company's book profit, payable when the tax under the normal provisions is lower than the MAT amount. Under the Income-tax Act, 2025 it is in section 206, and Budget 2026-27 cut the rate from 15% to 14% and made it a final tax.
- Provision
- Section 206, Income-tax Act 2025 (formerly 115JB)
- Rate
- 14% of book profit (from 15%), per Budget 2026-27
- Final tax
- No fresh MAT credit from 1 April 2026
- Not applicable to
- Companies under the 22% option in section 200
How MAT is calculated
Book profit is the net profit in the statement of profit and loss prepared under the Companies Act, adjusted for specified items such as income-tax provisions, certain reserves and exempt income. If tax on normal income is less than MAT on book profit, the company pays MAT, plus surcharge and cess. MAT applies to companies under the regular regime, including those claiming tax holidays, but not to companies that have opted for the 22% rate.
The 2026 changes
Budget 2026-27 proposed that MAT become a final tax with effect from 1 April 2026, so MAT paid from then on no longer creates a credit for future years, and reduced the rate to 14%. According to the Budget announcements, credit accumulated up to 31 March 2026 can still be carried forward, but its set-off is restricted, including a limit of one-fourth of regular tax liability for companies moving to the concessional regime. Check the enacted provisions for the year concerned.
Why it matters for startups
A startup claiming the three-year tax holiday on profits may still pay MAT on book profits, because MAT applies to companies in the regular regime. With MAT now a final tax, compare the total tax under the regular regime with holiday plus MAT against the 22% option without MAT before deciding.
Related services
Sources
- Business Standard: Budget 2026 makes MAT a final tax
- Nexdigm: MAT to be final tax from 1 April 2026, rate cut to 14%
- EZTax: Income-tax Act 1961 vs 2025 section mapping
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Does MAT apply to LLPs?
No. LLPs are subject to alternative minimum tax under separate provisions in specified cases, not MAT.
Is MAT credit still available?
Under the Budget 2026 changes, MAT paid from 1 April 2026 does not create fresh credit. Earlier credit can be carried forward with restrictions on set-off.
Does MAT apply to startups with the tax holiday?
Yes, generally. The holiday reduces normal tax, but MAT on book profit can still apply under the regular regime.