Where the rules sit now
Section 206 of the Income-tax Act, 2025 contains both minimum taxes:
- Section 206(1): minimum alternate tax (MAT) on the book profit of companies.
- Section 206(2): alternate minimum tax (AMT) on the adjusted total income of persons other than companies, such as limited liability partnerships.
Under the 1961 Act these were sections 115JB and 115JC. Credits built up under the 1961 Act carry over by section 536(2)(l), subject to the 2026 changes described below.
Companies: minimum alternate tax
If the tax on a company's total income is less than its MAT, its book profit is treated as its total income and it pays tax equal to the MAT (section 206(1)(a)). MAT is computed on book profit:
| Company | Rate on book profit |
|---|---|
| A unit located in an IFSC and deriving its income solely in convertible foreign exchange | 9% (section 206(1)(b)(i)) |
| Any other company | 14% (section 206(1)(b)(ii), reduced from 15% by the Finance Act, 2026) |
Two points follow for IFSC companies:
- The 9% rate depends on the company deriving its income solely in convertible foreign exchange. A company with any rupee income should test whether it still qualifies.
- MAT does not apply to a company that has opted for the concessional regime under section 200(5) or section 201(2) (section 206(1)(q)(ii)). A domestic company that opts for section 200 keeps the section 147 deduction for its IFSC unit (section 200(4)). Choosing that regime therefore takes the company out of MAT without losing the deduction. It has other consequences, which need to be weighed.
What the Finance Act, 2026 changed
The Finance Act, 2026 omitted the provisions of section 206(1) that created and carried forward MAT credit, and substituted new section 206(3) and (4) for credit brought forward from the 1961 Act. The Government's memorandum on the Finance Bill describes the policy: MAT paid under the old regime becomes a final tax, and no new MAT credit is allowed.
- Domestic companies. Credit under section 115JAA of the 1961 Act carried forward at 31 March 2026 can be set off only by a company that opts for section 200(5) or section 201(2) for a tax year beginning on or after 1 April 2026, and then only up to 25% of the tax payable in a year (section 206(3)).
- Foreign companies. Brought-forward credit is set off in a year when normal tax exceeds MAT, up to the difference (section 206(4)).
- In both cases the credit cannot be carried beyond the fifteenth tax year after the year in which it first became allowable under section 115JAA.
For an IFSC company in the old regime, MAT paid during its deduction years is now a cost, not a timing difference. That changes the comparison between the old regime with MAT and the section 200 regime without it.
Other persons: alternate minimum tax
Section 206(2) applies to a person other than a company that claims a deduction under any section in Part C of Chapter VIII (other than section 149) or under section 46. Section 147 is in Part C, so a non-corporate IFSC unit claiming the deduction is within the provision. If its regular income-tax is lower than AMT, its adjusted total income is treated as its total income and it pays AMT.
- For a unit located in an IFSC and deriving its income solely in convertible foreign exchange, AMT is 9% of adjusted total income (section 206(2)(b)(ii)(I)).
- AMT does not apply to persons who have opted under section 203(5) or 204(2), to persons taxed under section 202(1), or to specified funds referred to in Schedule VI (Note 1) (section 206(2)(d)).
- AMT paid in excess of regular tax gives a credit that can be carried forward and set off up to the fifteenth tax year (section 206(2)(e) to (g)). The Finance Act, 2026 amendments that we have read do not change these provisions.
The present position
The answer turns on the unit's form (company, LLP or branch of a foreign company), the regime it has chosen, its currency profile and the year in question. We advise on it entity by entity rather than by general rule. Each regime choice is made once and binds later years. Model the minimum tax across the whole 25-year block before the first return under section 147, alongside the section 218 rate for years outside the window. For the choice of entity form, see entity forms.