Income Tax

All about Form 29B under Income Tax Act, 1961

With Form 29B, companies disclose book profits certified by a CA for a particular assessment year according to the provisions laid down under section 115JB of Income Tax Act 1961. This form can be filed in online as well as offline mode. Let us discuss more on the concept of Form 29B under Income Tax Act 1961.

What is zero tax company?

The books of accounts of a company are prepared according to the Companies Act, and the tax payable is computed according to the guidelines of the Income Tax Act. Additionally, the profits provided in the Profit and Loss statement is called as book profits. Many companies had book profits but reported nil tax according to the Income Tax provisions. We refer to such companies as zero-tax companies. They made substantial book profits but claimed deductions and exemptions under the income tax act.

What is Minimum Alternate Tax?

With a view to bring zero-tax companies under the ambit of Income Tax Act, Section 115 JB was introduced under the Finance Act 1987. This section provides that companies are required to pay Minimum Alternate Tax of 18.5%. This means that the book profits are subject to 18.5% tax.

It is worth mentioning here that companies into the life insurance businesses are exempted from Minimum Alternate Tax.

Form 29B under Income Tax Act

Companies that come under the ambit of Section 115JB are required to file form 29B report. The CA of the company is required to fill it. The statement certifies that the book profit is according to Section 115 JB. The description must be obtained before Income Tax Filing. The report should be submitted electronically. 

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The Format of Form Section 29B contains the following information:

Form 29B under Income Tax Act
  • Name and Address of the Company;
  • PAN card number;
  • Nature of the Business ;
  • Assessment Year;
  • Amount of the book profit.

What is the objective of Form 29B under Income Tax Act?

The company should calculate the tax amount under MAT and the tax payable according to the standard tax provision. The company should pay whichever amount is more therefore, MAT amount is higher that is higher than the regular tax payable amount. The company should pay the MAT amount. The amount is calculated on the basis of book profit specified on Form 29B. The CA of the company audits the report. This form is crucial for claiming MAT credit therefore filing Form 29B under the Income Tax Act is necessary and also beneficial for companies to claim MAT credit.

What is MAT credit?

All companies are required to file report in form 29B[1], as per Section 115JB. Further, the company should pay the Minimum Alternate Tax, and yes, the company can avail of the MAT credit on the basis of tax paid. Note that the MAT amount paid in a year can be used as a credit in the following years. There may be a difference in the amount paid among the tax paid under the MAT and the tax payable under regular tax. The excess MAT amount paid is called as MAT credit. Hence this credit can be carried forward for 15 financial years.

Conclusion

Companies having book profits should pay Minimum Alternate Tax. The amount of book profit is specified in the audited report of the company under Form 29B. However, it assumes to be the income of the company for calculating taxes. Thus, based on this, MAT is calculated and paid. Form 29B under Income Tax Act is required for claiming MAT credit in subsequent years hence it is very important form for companies.

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