Section 115J of the Income-tax Act, 1961: Minimum Tax on Book Profits
Section 115J introduced an early form of minimum taxation for certain companies. It treated 30% of adjusted book profit as taxable total income where the income otherwise computed under the Act was lower. Crucially, this rule applied only to a specified historical period.
What did Section 115J cover?
Section 115J was a special provision relating to certain companies under the Income-tax Act, 1961. It applied where a company's taxable income calculated under the ordinary provisions fell below 30% of its adjusted book profit. Companies engaged in the generation or distribution of electricity were excluded under the historical wording.
Assessment year means the year in which income of the preceding financial year is assessed. Book profit under Section 115J meant the net profit shown in the prescribed profit and loss account, modified by the statutory increases and reductions. It was not simply the accounting profit appearing in the financial statements.
How the minimum deemed income rule worked
- Compute total income under the ordinary provisions of the Income-tax Act, 1961.
- Prepare the profit and loss account in accordance with the historical statutory accounting requirements.
- Calculate adjusted book profit using the Explanation to Section 115J.
- Compare ordinary taxable income with 30% of adjusted book profit.
- Where ordinary income is lower, treat 30% of book profit as the deemed total income for that relevant year.
The figure of 30% was a deemed-income threshold, not a 30% tax rate. Tax was then charged under the applicable rates and rules for the period.
Meaning of book profit and adjustments
Under Section 115J(1A), the profit and loss account was prepared by reference to Parts II and III of Schedule VI to the Companies Act, 1956, as applicable at the time. The Explanation to Section 115J required specified adjustments, subject to its precise historical wording and conditions.
| Category | Historical treatment under Section 115J |
|---|---|
| Starting point | Net profit as shown in the prescribed profit and loss account. |
| Illustrative increases | Specified income-tax provisions, transfers to reserves, provisions for unascertained liabilities, provisions for subsidiary losses, proposed or paid dividends, and certain expenditure relating to exempt income, to the extent covered by the statutory Explanation. |
| Other specific increases | Specified adjustments involving reserves under Section 80HHD and profits under Section 33AC, where applicable under the relevant historical amendment. |
| Illustrative reductions | Eligible withdrawals from reserves or provisions, specified exempt income credited to the profit and loss account, qualifying export-related amounts and specified past loss/depreciation adjustments, subject to statutory limitations. |
Because the text was amended during the provision's short period of operation, any historical assessment, appeal or rectification must use the version effective for the particular assessment year.
Illustrative calculation
Suppose, for a historical assessment year to which Section 115J applied, a qualifying company's ordinary taxable income was Rs. 18 lakh and its adjusted book profit was Rs. 100 lakh. Thirty per cent of adjusted book profit would be Rs. 30 lakh. As Rs. 18 lakh is lower, the deemed total income would be Rs. 30 lakh. This example illustrates the statutory comparison only; it does not determine the tax payable.
Treatment of carry-forward amounts
Section 115J(2) clarified that application of the deemed-income rule did not alter the determination of specified amounts eligible to be carried forward under provisions concerning depreciation, investment allowance and certain losses. The underlying eligibility and carry-forward rules remained relevant.
Section 115J versus later corporate minimum-tax provisions
| Provision | General significance |
|---|---|
| Section 115J | Historical deemed-income rule for qualifying companies, with a 30% book-profit threshold, applicable to the specified assessment years from 1988 to 1990. |
| Section 115JA | Subsequent book-profit-based minimum-tax regime for a later period. |
| Section 115JB | Later Minimum Alternate Tax (MAT) framework under the 1961 Act, subject to its own scope, exclusions, rates and amendments. |
| Income-tax Act, 2025 | Applies from 1 April 2026; consult the current Act and relevant transitional provisions rather than assuming that Section 115J remains operative. |
For connected topics, read Section 115JA, Section 115JB, and Section 115JAA.
Original Section 115J material and amendment notes
The source webpage contained the historical provision and its amendment footnotes. That material is retained below for reference. It should not be mistaken for the law currently governing corporate taxation.
Read the historical Section 115J text and amendment notes
115J Income Tax Act - Special provisions relating to certain companies Section 115J of Income Tax Act 1961 - Special provisions relating to certain companies 1(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company 2 (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 3 but before the 1st day of April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. 4 (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). Explanation.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year 5 prepared under sub-section (1A), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves 2 (other than the reserves specified in section 80HHD 6 or sub-section (1) of section 33AC), by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III 7 applies; or 2 (g) the amount withdrawn from the reserve account under section 80HHD, where it has been utilised for any purpose other than those referred to in sub-section (4) of that section; or (h) the amount credited to the reserve account under section 80HHD, to the extent that amount has not been utilised within the period specified in sub-section (4) of that section; 6 (ha) the amount deemed to be the profits under sub-section (3) of section 33AC, 8 if any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited to the profit and loss account, and as reduced by,- (i) the amount withdrawn from reserves 2 (other than the reserves specified in section 80HHD) or provisions, if any such amount is credited to the 9 profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or 10 (iii) the amounts as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (i) and (ii) attributable to the business, the profits from which are eligible for deduction under section 80HHC or section 80HHD; so, however, that such amounts are computed in the manner specified in sub-section (3) or sub-section (3A) of section 80HHC or sub-section (3) of section 80HHD, as the case may be; or 11 (iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable. (2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J. -------------------- 1. Ins. by Act 11 of 1987, s. 43 (w.e.f. 1-4-1988). 2. Ins. by Act 3 of 1989, s. 19 (w.e.f. 1-4-1989). 3. Ins. by Act 12 of 1990, s. 32 (w.e.f. 1-4-1990). 4. Ins. by Act 13 of 1989, s. 19 (w.e.f. 1-4-1989). 5. Subs. by s. 19, ibid., for "prepared in accordance with the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956 (1 of 1956)" (w.e.f. 1-4-1989). 6. Ins. by Act 36 of 1989, s. 12 (w.e.f. 1-4-1990). 7. Subs. by Act 3 of 1989, s. 19, for "applies," (w.e.f. 1-4-1989). 8. Subs. by s. 19, ibid., for "if any such amount is debited" (w.e.f. 1-4-1989). 9. Subs. by Act 13 of 1989, s. 19, for "profit and loss account; or" (w.e.f. 1-4-1988). 10. Ins. by Act 3 of 1989, s. 19 (w.e.f. 1-4-1989). 11. Clause (iii) renumbered as clause (iv) by s. 19, ibid. (w.e.f. 1-4-1989).
Frequently asked questions
Is Section 115J applicable to current company income?
No. Section 115J was framed for assessment years beginning 1 April 1988 and before 1 April 1991. Later minimum-tax provisions must be considered for subsequent periods.
What was the minimum deemed income under Section 115J?
If income computed under the Act was less than 30% of the company's adjusted book profit, 30% of that book profit was treated as taxable total income, subject to the historical provision.
Were electricity companies covered?
The provision excluded companies engaged in the business of generation or distribution of electricity, as stated in the historical text.
Does Section 115J replace Section 115JB?
No. Section 115J is a historical provision. Section 115JB is a separate, later minimum alternate tax regime, and the law applicable to the relevant tax year must be checked.
Official legislation and references
- Income Tax Department - Income-tax Act, 1961 (historical legislation and amendments).
- Income Tax Department - e-Filing portal (current taxpayer guidance).
- India Code - official central legislation repository (search for the applicable Act and version).
- Income Tax Department - official tax-law resources.
Editorial note: This article is general legal information. Historical disputes require examination of the statute and amendments applicable to the assessment year, as well as relevant judicial decisions.