The Minimum Alternate Tax (MAT) was introduced in the direct tax system to make sure that companies having large profits and declaring substantial dividends to shareholders but who were not contributing to the Govt by way of corporate tax, by taking advantage of the various incentives and exemptions provided in the Income-tax Act, pay a fixed percentage of book profit as minimum alternate tax.
In other words,its a tax that has to be paid by the companies that are enjoying tax benefits or tax exemption under various schemes.It is mostly targetted to the R&D companies and Export oriented units which enjoy tax emptions.Under this they have to pay a particular amount of MAT, so they come under the tax net.
AT present it is 2% in new Direct tax code.
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