Can all accumulated MAT credit be used immediately?

No. The applicable company category, tax-regime option, set-off limits and remaining credit life must be checked.

Corporate Taxation | MAT Credit

Section 115JAA: MAT Credit, Carry Forward and Set-Off under Indian Income Tax Law

Q: Is section 115JAA still relevant after 1 April 2026?

Yes, for historical credit and earlier years; transitional utilisation is governed by section 206 of the 2025 Act.

Q: Can a company generate new MAT credit under the 2025 Act?

No. No fresh MAT credit accrues under the Income-tax Act, 2025.

Updated: 27 October 2026 | Income-tax Act, 1961 and Income-tax Act, 2025

Section 115JAA of the Income-tax Act, 1961 governed the credit for Minimum Alternate Tax (MAT) paid by companies. For tax years beginning on or after 1 April 2026, the Income-tax Act, 2025 uses section 206 for MAT and the treatment of eligible accumulated MAT credit. Importantly, the new framework does not create fresh MAT credit; it contains transitional rules for qualifying pre-2026 balances.

Current-law alert (October 2026): Do not assume that every company may use its historic MAT credit in 2026-27. Section 206, as amended in 2026, distinguishes domestic companies electing specified concessional regimes and foreign companies. The remaining original credit life and relevant set-off limits must be checked.

What is MAT and MAT credit?

Minimum Alternate Tax (MAT) is a special corporate tax computation designed to ensure that a company with substantial accounting book profits pays a minimum amount of income tax even if deductions or incentives substantially reduce its normal tax liability. MAT credit is the excess of MAT actually paid over the tax computed under ordinary provisions, subject to statutory restrictions. The historical credit mechanism is in section 115JAA; the MAT charging provision was section 115JB.

Section 115JAA under the Income-tax Act, 1961

The original section addressed tax paid under section 115JA; section 115JAA(1A) extended the credit mechanism to MAT paid under section 115JB for assessment year 2006-07 and later years. Section 115JAA(2) and (2A) determined the difference between MAT and normal tax. No interest was payable on the credit. The foreign-tax-credit adjustment in the second proviso to section 115JAA(2A) prevented a specified excess foreign tax credit from inflating MAT credit.

Carry-forward and set-off rules

Section 115JAA(3) historically allowed a five-assessment-year carry-forward for credit arising under section 115JA. Section 115JAA(3A), as amended, provided a 15-assessment-year carry-forward for section 115JB credit. Section 115JAA(4) and (5) permitted set-off in a normal-tax year, generally restricted to the difference between the normal tax and MAT for that year. The unused amount could remain available only within the prescribed period.

Illustration: historical MAT credit computation

Illustrative amount	Rupees
Tax under ordinary provisions	8,40,000
MAT liability under section 115JB	10,00,000
Excess MAT potentially eligible as credit under the former law	1,60,000

This is a simplified pre-2026 illustration, before adjustments such as foreign tax credit. It is not a statement that a new credit of Rs. 1,60,000 arises under the 2025 Act.

Income-tax Act, 2025: Section 206 and the 2026 changes

Section 206 addresses MAT and AMT under the Income-tax Act, 2025. The Finance Act, 2026 revised the treatment of accumulated MAT credit. The Income Tax Department explains that no fresh MAT credit accrues under the 2025 Act. Qualifying MAT credit accumulated under section 115JAA as at 31 March 2026 can be carried forward and used subject to section 206 and the transition rules.

Domestic companies

The amended section 206(3) applies to a domestic company that exercises the specified concessional tax-regime option under section 200(5) or section 201(2) for a tax year beginning on or after 1 April 2026. For such companies, qualifying brought-forward MAT credit may be set off up to 25% of the tax payable on total income computed under the other provisions for that year. Unused credit remains subject to the original 15-year outer limit. A domestic company continuing under the normal regime should not assume it can immediately use the credit without meeting the new statutory conditions.

Foreign companies

Foreign companies have a separate treatment under section 206(4). Eligibility and annual set-off must be determined from that subsection, including applicable restrictions, rather than automatically applying the domestic-company 25% cap.

Transition from the repealed Act

The savings and transition provisions of the Income-tax Act, 2025 preserve qualifying unutilised credit arising under section 115JAA of the 1961 Act, but only for the remaining permitted period and subject to the new Act's conditions. Reassessments and appellate orders may also affect the balance.

Practical compliance checklist

Reconcile year-wise MAT credit generated under section 115JAA up to 31 March 2026 against income-tax returns, assessment orders and records.
Identify the year each credit originated and the balance of its 15-year life.
Determine whether the company is domestic or foreign and whether the relevant option under the new Act has been exercised.
Apply section 206(3) or (4), as relevant, and any foreign-tax-credit limitations.
Reconcile utilisation and closing balance in the applicable return schedules and retain supporting computations.

Other important provisions in original Section 115JAA

Section 115JAA(6): The credit amount could be adjusted following specified assessment, rectification, appeal or revision orders. Section 115JAA(7): On conversion of a private or unlisted public company into an LLP under the LLP Act, 2008, the successor LLP did not receive the benefit of this section. The statutory definitions of private company and unlisted public company referred to the LLP Act.

Frequently asked questions

Is section 115JAA still relevant after 1 April 2026?

Yes. It remains relevant to MAT credits accumulated under the 1961 Act and to earlier tax years. Their post-transition treatment is governed by the 2025 Act, especially section 206.

Can a company generate new MAT credit in tax year 2026-27?

No. The Income Tax Department's current guidance states that no fresh MAT credit accrues under the Income-tax Act, 2025.

Does all accumulated MAT credit automatically remain usable?

No. Availability depends on the company's category, its tax-regime election, the applicable annual set-off ceiling, and the balance of the original carry-forward period.

Official legislation and guidance

Historical statutory text and amendment notes from the original webpage

115JAA Income Tax Act - Tax credit in respect of tax paid on deemed income relating to certain companies Section 115JAA of Income Tax Act 1961 - Tax credit in respect of tax paid on deemed income relating to certain companies 1(1) Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. 2 (1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the assessment year commencing on the 1st day of April, 2006 and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. 3 (2) The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: Provided that no interest shall be payable on the tax credit allowed under sub-section (1). (2A) The tax credit to be allowed under sub-section (1A) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: Provided that no interest shall be payable on the tax credit allowed under sub-section (1A): 4 Provided further that where the amount of tax credit in respect of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, allowed against the tax payable under the provisions of sub-section (1) of section 115JB exceeds the amount of such tax credit admissible against the tax payable by the assessee on its income in accordance with the other provisions of this Act, then, while computing the amount of credit under this sub-section, such excess amount shall be ignored. (3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-sections (4) and (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1). (3A) The amount of tax credit determined under sub-section (2A) shall be carried forward and set off in accordance with the provisions of sub-sections (4) and (5) but such carry forward shall not be allowed beyond the 5 fifteenth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A). (4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA 4 or section 115JB, as the case may be. (5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA 6 or section 115JB, as the case may be for that assessment year. (6) Where as a result of an order under sub-section (1) or sub-section (3) of section 143, section 144, section 147, section 154, section 155, sub-section (4) of section 245D, section 250, section 254, section 260, section 262, section 263 or section 264, the amount of tax payable under this Act is reduced or increased, as the case may be, the amount of tax credit allowed under this section shall also be increased or reduced accordingly. 7 (7) In case of conversion of a private company or unlisted public company into a limited liability partnership under the Limited Liability Partnership Act, 2008 (6 of 2009), the provisions of this section shall not apply to the successor limited liability partnership. Explanation.-For the purposes of this section, the expressions "private company" and "unlisted public company" shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009). -------------------- 1. Ins. by Act 26 of 1997, s. 38 (w.e.f. 1-4-1997). 2 Ins. by Act 18 of 2005, s. 35 (w.e.f. 1-4-2006). 3. Subs. by Act 21 of 2006, s. 23, for sub-sections (2) and (3) (w.e.f. 1-4-2007). 4. Ins. by Act 7 of 2017, s. 46 (w.e.f. 1-4-2018). 5. Subs. by, s. 46, ibid., for "tenth assessment year" (w.e.f. 1-4-2018). 6. Ins. by Act 10 of 2000, s. 51 (w.e.f. 1-4-2001). 7. Ins. by Act 14 of 2010, s. 29 (w.e.f. 1-4-2011).

This article is general legal and tax information. Historical assessments and live credit claims require checking the statute and applicable amendments for the relevant tax year.