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Alternate Minimum Tax in India: Section 115JD of the Income Tax Act 2025 Explained
When large deductions bring your tax bill close to zero, Section 115JD of the Income Tax Act 2025 sets a floor — the Alternate Minimum Tax (AMT). It ensures no non-corporate taxpayer escapes tax entirely by stacking deductions. If your regular tax falls below the AMT, you pay the difference.
What is the Alternate Minimum Tax?
The AMT is a minimum tax that applies when the income tax you owe under the normal rules is less than a calculated floor. The floor is 18% of your adjusted total income. If the normal tax is lower, the difference is added to your tax bill and becomes your AMT liability.
The key rule is in Section 115JD(1) of the Income Tax Act 2025: for any person other than a company, if the regular income tax payable is less than the AMT calculated on your adjusted total income, you must pay AMT instead.
Who does Section 115JD apply to?
Section 115JD applies to all non-corporate taxpayers:
- Individuals
- Hindu Undivided Families (HUFs)
- Firms
- Limited Liability Partnerships (LLPs)
- Association of Persons (AOPs) and Body of Individuals (BOIs)
It does not apply to companies — companies have a separate minimum tax under Section 115JB (MAT).
What is adjusted total income?
Adjusted total income is the starting point for calculating AMT. It is your total income plus the deductions you claimed under specific sections that the Act treats as adding to your tax benefit:
- Section 80C (life insurance, PPF, ELSS, home loan principal, etc.)
- Section 80D (health insurance premium)
- Section 24(b) (home loan interest)
- Section 80E (education loan interest)
- Section 80CCD(1) and 80CCD(1B) (NPS contributions)
- Section 80G (donations)
- Section 80TTA/TTB (interest income deductions)
- Other sections under Chapter VI-A that reduce your taxable income
The logic: these deductions lower your regular tax. AMT recalculates tax on the income before those deductions to set a floor.
How is AMT calculated?
Step 1: Calculate your regular income tax on taxable income after all deductions.
Step 2: Calculate adjusted total income = total income (without Chapter VI-A deductions) + deductions claimed under the specified sections.
Step 3: Calculate AMT = 18% of adjusted total income.
Step 4: If regular tax ≤ AMT, pay AMT instead. If regular tax > AMT, pay regular tax only.
Step 5: The excess AMT paid (AMT minus regular tax) becomes an AMT credit that you can use in future years.
Worked example — freelancer with high deductions
Ravi is a software freelancer in Bangalore with gross receipts of ₹50 lakh. His expenses (not claimed as deductions) are ₹12 lakh. His deductions under Chapter VI-A total ₹7.5 lakh:
- Section 80C: ₹1.5 lakh (PPF, life insurance, home loan principal)
- Section 80D: ₹50,000 (family health insurance)
- Section 24(b): ₹2,00,000 (home loan interest, self-occupied property)
- Section 80CCD(1B): ₹50,000 (NPS additional contribution)
- Section 80G: ₹25,000 (donations)
- Section 80E: ₹75,000 (education loan interest)
Step 1 — Regular tax calculation:
| Item | Amount |
|---|---|
| Gross receipts | ₹50,00,000 |
| Less: Expenses | ₹12,00,000 |
| Gross income (PGBP) | ₹38,00,000 |
| Less: Chapter VI-A deductions | ₹7,50,000 |
| Taxable income (new regime) | ₹30,50,000 |
New regime slabs for FY 2026-27:
| Income slab | Rate | Tax |
|---|---|---|
| Up to ₹4,00,000 | 0% | ₹0 |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 |
| Above ₹24,00,000 | 30% | ₹1,95,000 |
| Total regular tax | ₹4,95,000 | |
| Add: 4% cess | ₹19,800 | |
| Total regular tax + cess | ₹5,14,800 |
Step 2 — Adjusted total income:
| Item | Amount |
|---|---|
| Total income (before Chapter VI-A) | ₹38,00,000 |
| Add: Section 80C | ₹1,50,000 |
| Add: Section 80D | ₹50,000 |
| Add: Section 24(b) | ₹2,00,000 |
| Add: Section 80CCD(1B) | ₹50,000 |
| Add: Section 80G | ₹25,000 |
| Add: Section 80E | ₹75,000 |
| Adjusted total income | ₹43,50,000 |
Step 3 — AMT calculation:
18% × ₹43,50,000 = ₹7,83,000
Step 4 — Comparison:
| Amount | |
|---|---|
| Regular income tax | ₹4,95,000 |
| AMT (18% of adjusted total income) | ₹7,83,000 |
| AMT is higher — Ravi pays AMT |
Ravi must pay ₹7,83,000 as income tax instead of ₹4,95,000. The difference of ₹2,88,000 is the AMT he pays.
Step 5 — AMT credit:
Ravi can carry forward ₹2,88,000 as an AMT credit. In any future year where his regular income tax exceeds the AMT for that year, he can use this credit to reduce his tax bill. The credit is valid for up to 10 assessment years.
The AMT credit mechanism
This is the most practical part of Section 115JD for most taxpayers. When you pay AMT (because regular tax was lower), you accumulate a credit. When your regular tax in a later year is higher than the AMT for that year, you can set off the credit.
For example, if in Year 3 Ravi’s regular tax is ₹8,00,000 and the AMT is ₹6,50,000, he can use ₹1,50,000 of his accumulated AMT credit, paying only ₹6,50,000 in total.
The credit is available for 10 assessment years from the year in which the AMT was paid.
The new regime minimum tax floor (Section 115JD(1A))
Section 115JD(1A) of the Income Tax Act 2025 introduces a separate minimum tax provision for the new tax regime. Under this provision, the tax calculated under the new regime cannot be less than 10% of the total income (before Chapter VI-A deductions), if the total income exceeds a certain threshold.
This is a newer provision that creates a floor specifically for new-regime taxpayers who claim large deductions. The interaction between Section 115JD(1) (the 18% AMT) and Section 115JD(1A) (the 10% new-regime floor) means high-deduction new-regime filers may face a minimum tax on their gross income before deductions.
Common mistakes to avoid
Claiming deductions without checking the AMT impact
If you are a freelancer, partner in a firm, or professional with high deduction-eligible expenses (home loan interest, health insurance, NPS, donations), always calculate whether your regular tax will fall below AMT before claiming everything. The AMT effectively limits the tax value of deductions.
Forgetting to carry forward the AMT credit
Many taxpayers pay AMT in one year but do not claim the credit in later years when their regular tax exceeds AMT. Track your AMT credit in a simple table — it is valid for 10 years and can reduce a large future tax bill.
Assuming AMT applies only to companies
MAT applies to companies under Section 115JB. AMT under Section 115JD applies to everyone else — individuals, HUFs, firms, LLPs. If your income is from business or profession and you claim significant deductions, you could be liable for AMT.
Not distinguishing between AMT and the new-regime minimum floor
Section 115JD(1) AMT (18% of adjusted total income) and Section 115JD(1A) new-regime minimum (10% of total income) are two different floors. A tax advisor can determine which applies and which produces the higher tax liability in your case.
Frequently asked questions
Does AMT apply if I am a salaried employee?
Salaried employees typically have tax already withheld via TDS every month and rarely face AMT, because their income after standard deduction and the new-regime zero-slab floor does not fall below the AMT threshold. AMT is more relevant for those with business, professional, or freelance income where large deductions can push the regular tax very low.
How do I know if my regular tax is below the AMT?
Calculate your adjusted total income (total income plus Chapter VI-A deductions), multiply by 18%, and compare with your regular income tax. If the result is higher, you are liable for AMT. An income tax calculator or a tax advisor can do this in minutes.
Can I avoid AMT by switching tax regimes?
The old tax regime has its own minimum tax considerations. Under the old regime, the AMT under Section 115JC (the pre-2025 Act provision equivalent) applies to individuals and firms with certain deducions. The new regime has a separate floor under Section 115JD(1A). Neither regime offers a guaranteed escape from a minimum tax if you claim large deductions. The right regime depends on your income level and total deductions — run the numbers both ways.
What happens to my AMT credit if I switch from new regime to old regime?
If you pay AMT in one year under the new regime and then switch to the old regime in a later year, the AMT credit accumulated under Section 115JD(3) can still be used to offset regular tax under the old regime. The credit is not lost on a regime switch, but the set-off is subject to the condition that regular tax exceeds the AMT for that year.
Is AMT credit available for tax saved under Section 80C and 80D?
Yes. The adjusted total income for AMT adds back deductions claimed under Sections 80C, 80D, 80E, 80CCD, 80G, 80TTA, 24(b), and other Chapter VI-A sections. If claiming these deductions pushes your regular tax below the AMT floor, you pay the difference. The AMT credit you earn can be used in future years when regular tax exceeds AMT.
Sources
- Income Tax Act 2025, Section 115JD (verified 8 October 2026)
- Income Tax Act 2025, Section 115JD(1A) — new regime minimum tax floor (verified 8 October 2026)
- CBDT Circular on AMT credit set-off — Section 115JD(3) (verified 8 October 2026)