Budget 2026: Major Changes in MAT Provisions, no credit for MAT w.e.f 01.04.2026

The Union Budget 2026-27, presented by the Finance Minister, Nirmala Sitharaman, introduced major changes regarding the rationalisation of MAT provisions.

Minimum Alternate Tax (MAT) is applicable under Section 115JB of the Income Tax Act to companies whose regular tax payable is less than 15% of their book profit. This ensures that the firms using large value deductions still pay their taxes. The MAT provisions are only applicable to companies that have opted for the old tax regime.

If the company pays MAT, it can carry forward the excess MAT (i.e., the difference between the MAT and normal tax) for up to 15 assessment years to adjust it against future tax liabilities where the company’s regular tax liability is more than the MAT liability.

Budget 2026 changes this system completely. As per the proposal, in the old tax regime, MAT payment will become the final tax, and the Companies will not get new MAT credit. However, the MAT rate is proposed to be reduced from 15% to 14% of book profits, saving companies money.

Additionally, the MAT credit will still work, but only in the new tax regime for domestic companies. They can still use credits of up to 25% of the tax liability. The foreign companies will be allowed to set off the MAT credits to the extent of the difference between the tax on the total income and the MAT, for the tax year in which the regular tax exceeded the MAT. This will help the companies smoothly shift from the old tax regime to the new tax regime.

This amendment will be effective from April 1, 2026, for the relevant tax year 2026-27 and the subsequent tax years.