Section 115JA of Income-tax Act, 1961: Deemed Income of Certain Companies
Section 115JA of the Income-tax Act, 1961 introduced a minimum alternate tax (MAT) framework for certain companies whose taxable income under ordinary provisions was substantially lower than their accounting profits. The provision was applicable to assessment years 1997-98 through 2000-01. It is a historical provision, not the rule for calculating a company's current MAT liability.
What did Section 115JA provide?
Under subsection (1), if the total income computed under the ordinary provisions was less than 30% of book profit, the company's total income was deemed to equal 30% of that book profit. This was a deemed-income floor, not a stand-alone flat 30% tax rate. Income-tax was then determined under the relevant rates and rules.
Relevant assessment years and companies
The section concerned companies for assessment years 1997-98, 1998-99, 1999-2000 and 2000-01. The profit and loss account was required to be prepared with reference to Parts II and III of Schedule VI to the Companies Act, 1956, with specific depreciation consistency requirements. References to the Companies Act, 1956 are retained because they were part of the historical legal framework; they should not be replaced mechanically with references to the Companies Act, 2013.
Meaning and computation of book profit
Subsection (2) and its Explanation began with the net profit shown in the prescribed profit and loss account, then required specified additions and deductions. The statutory adjustments are important: accounting profit and book profit for Section 115JA are not necessarily identical.
Illustrative additions
- Income-tax paid or payable and provisions for it, where debited.
- Amounts carried to reserves and provisions for unascertained liabilities.
- Provisions for losses of subsidiary companies and proposed or paid dividends, where relevant under the historical text.
- Expenditure relating to income exempt under Chapter III.
- Provision for diminution in asset value, subject to the applicable amendment and its effective date.
Illustrative reductions
- Qualifying withdrawals from reserves or provisions, subject to statutory conditions.
- Income exempt under Chapter III that was credited to the profit and loss account.
- The lower of brought-forward book loss (excluding depreciation) and unabsorbed book depreciation, subject to the statutory conditions.
- Specified profits from power generation, infrastructure undertakings, eligible industrial undertakings, sick industrial companies and export-related activities, where the historical requirements were met.
These categories summarize the provision; the precise adjustments, amendment dates and conditions must be checked for the assessment year in question.
Example of deemed income under Section 115JA
Assume a company's book profit, after all applicable statutory adjustments, was Rs. 10,00,000 and its total income under ordinary provisions was Rs. 1,80,000.
30% of book profit: Rs. 3,00,000. Because ordinary total income (Rs. 1,80,000) was lower, deemed total income under Section 115JA would be Rs. 3,00,000. The applicable tax rate would then be applied separately.
Carry-forward of losses and depreciation
Subsection (3) preserved the determination of specified amounts eligible to be carried forward under the ordinary provisions, including depreciation, investment allowance and losses. Deeming income under Section 115JA did not, by itself, replace the statutory rules for determining these carry-forwards.
Section 115JA versus later MAT provisions
| Provision | Period / significance |
|---|---|
| Section 115J | Earlier book-profit-based minimum taxation for assessment years 1988-89 to 1990-91. |
| Section 115JA | Historical 30% deemed-income mechanism for assessment years 1997-98 to 2000-01. |
| Section 115JB | Later MAT regime under the Income-tax Act, 1961, with different computation and tax rules. |
| Income-tax Act, 2025 | New statutory framework effective from 1 April 2026; use the applicable provisions and transitional rules for the relevant tax year. |
Do not apply the historical 30% deemed-income test in Section 115JA to a present-day company tax computation.
Official legislation and references
- Income Tax Department: Income-tax Act, 1961
- Income Tax Department: official portal and legislation resources
- India Code: central legislation database
Historical statutory text and amendment notes
The following material is preserved from the original webpage for reference. It includes the original amendment notes and the statutory language as reproduced on that page. Verify the authoritative text and amendment dates when applying the provision to historical assessments.
Read original Section 115JA material and amendment notes
115JA Income Tax Act - Deemed income relating to certain companies Section 115JA of Income Tax Act 1961 - Deemed income relating to certain companies 1(1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, 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, 1997 2 but before the 1st day of April, 2001 (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. (2) 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): Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation of depreciation shall correspond to the method and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year falling within the relevant previous year. 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 prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves 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 applies; 3 (g) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (g) is debited to the profit and loss account, and as reduced by,- (i) the amount withdrawn from any reserves or provisions if any such amount is credited to the 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, 1997 4 but ending before the 1st day of April, 2001 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 5 (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or (iv) the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or (v) the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in 6 sub-section (4) and sub-section (5) of section 80-IB, for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the 7 profits and gains under sub-section (4) or sub-section (5) of section 80-IB; or (vi) the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility 8 as defined in the Explanation to sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); 9 or 10 (viii) the amount of profits eligible for deduction under section 80HHC, computed under clause (a), (b) or (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in sub-sections (4) and (4A) of that section; (ix) the amount of profits eligible for deduction under section 80HHE, computed under sub-section (3) of that section. (3) 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. (4) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. -------------------- 1. Ins. by Act 33 of 1996, s. 39 (w.e.f. 1-4-1997). 2. Ins. by Act 10 of 2000, s. 50 (w.e.f. 1-4-2001). 3. Subs. by Act 33 of 2009, s. 44, for "if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by, -" (w.e.f. 1-4-1998). 4. Ins. by Act 10 of 2000, s. 50 (w.e.f. 1-4-2001). 5. Subs. by Act 20 of 2002, s. 51, for "clause (iii) and the Explanation thereto" (w.e.f. 1-4-1997). 6. Subs. by Act 27 of 1999, s. 90, for "sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2) of section 80-IA" (w.e.f. 1-4-2000). 7. Subs. by s. 90, ibid., for "profits and gains under sub-section (5) of section 80-IA" (w.e.f. 1-4-2000). 8. Subs. by s. 90, ibid., for "under sub-section (12) of section 80-IA, and subject to fulfilling the conditions laid down in sub-section (4A) of section 80-IA" (w.e.f. 1-4-2000). 9. Ins. by Act 26 of 1997, s. 37 (w.e.f. 1-4-1997). 10. Ins. by s. 37, ibid. (w.e.f. 1-4-1998).
Frequently asked questions
Is Section 115JA applicable to companies in 2026?
No. Section 115JA applied to assessment years 1997-98 to 2000-01. Current obligations depend on the tax year and the legislation then applicable.
Was the MAT tax rate 30% under Section 115JA?
No. Thirty percent was the portion of book profit treated as deemed total income when the ordinary total income was lower; it was not itself the corporate income-tax rate.
Does the provision affect carried-forward losses?
Subsection (3) expressly addressed the continued determination of certain carried-forward allowances and losses under the ordinary provisions.