MAT After 1 April 2026: Section 115JB vs Section 206 of the Income-tax Act, 2025

Minimum Alternate Tax (MAT) changed materially from 1 April 2026. Under the Income-tax Act, 1961, section 115JB imposed MAT at 15% of book profit in applicable cases and section 115JAA allowed the excess MAT over normal tax to become a credit that could generally be carried forward for up to 15 assessment years. Under the Income-tax Act, 2025 as amended by the Finance Act, 2026, section 206 reduces the MAT rate to 14% for companies remaining in the old regime, but MAT paid for Tax Year 2026-27 onward is final tax: it no longer creates fresh MAT credit.

The change is therefore not a mere renumbering exercise. It changes the economics of remaining in the old corporate tax regime and the way companies should value accumulated MAT credit.

Old law: sections 115JB and 115JAA of the Income-tax Act, 1961

Under section 115JB, a company could be required to pay MAT where tax computed under the normal provisions was lower than the prescribed percentage of its book profit. For the period immediately before the new Act took effect, the general MAT rate was 15% of book profit, subject to the special rate and exclusions applicable in specific cases such as qualifying IFSC units and companies that had opted for specified concessional corporate tax regimes.

The crucial companion provision was section 115JAA. If MAT exceeded normal corporate tax, the excess could become MAT credit. That credit could then be carried forward and used in a later year when normal tax exceeded MAT, subject to the statutory conditions and carry-forward period.

New law: section 206 of the Income-tax Act, 2025

Section 206 is the corresponding MAT provision under the Income-tax Act, 2025. The Finance Act, 2026 materially reworked the regime with effect from 1 April 2026. For companies that continue in the old tax regime, the MAT rate is reduced from 15% to 14% of book profit. At the same time, MAT paid under the new framework is treated as final tax and does not generate fresh MAT credit from Tax Year 2026-27 onward.

For domestic companies with accumulated MAT credit from periods up to 31 March 2026, utilisation is linked to migration to the new corporate tax regime. The official Budget 2026 FAQ states that such credit may be set off after moving to the new regime, subject to a yearly cap of 25% of the total tax liability for that year. The original statutory life of the accumulated credit continues; the transition does not restart the 15-year clock.

What actually changed?

• MAT rate for companies remaining in the old regime: reduced from 15% to 14% from Tax Year 2026-27.

• Fresh MAT credit: no new MAT credit is generated from MAT paid under the post-1 April 2026 old-regime framework.

• Nature of MAT: MAT becomes final tax for companies that remain in the old regime.

• Legacy MAT credit: accumulated credit up to 31 March 2026 is preserved, but its use is governed by the new transition framework rather than being automatically available exactly as before.

• Domestic-company transition: accumulated MAT credit can be used after shifting to the new regime, subject to the statutory utilisation restriction; official Budget guidance describes the annual cap as 25% of the total tax liability.

• Compliance mapping: Form 29B under the old framework is replaced by Form 66 under the Income-tax Rules, 2026 for section 206 reporting.

What did NOT change?

The basic purpose of MAT remains familiar: it is an alternate book-profit-based tax computation for companies that would otherwise have a lower normal tax liability. The concept of adjusting accounting profit to arrive at statutory book profit also continues. Likewise, companies already outside MAT because they validly operate under specified concessional regimes remain subject to the conditions of those regimes rather than MAT merely because the section number has changed.

Worked example: why the new rule matters

Assume an eligible company remains in the old regime in Tax Year 2026-27 and has book profit of ₹10 crore. Ignoring surcharge and cess for illustration, MAT at 14% would be ₹1.40 crore. If its normal tax liability is ₹1.10 crore, the company would pay MAT because the MAT amount is higher.

Under the pre-2026 framework, the ₹30 lakh excess of MAT over normal tax could potentially enter the MAT-credit mechanism, subject to section 115JAA. Under the post-1 April 2026 regime, the ₹1.40 crore MAT is final tax for the year and that ₹30 lakh excess does not create fresh MAT credit. That difference can materially affect the long-term value of deductions or incentives that keep a company in the old regime.

Example: using MAT credit accumulated before 1 April 2026

Assume a domestic company has ₹80 lakh of valid MAT credit accumulated up to 31 March 2026 and shifts to the new corporate tax regime in Tax Year 2026-27. If its total tax liability for the year is ₹1 crore, the official Budget 2026 guidance describes the maximum MAT-credit set-off for that year as 25% of the total tax liability, or ₹25 lakh. The unused legacy balance may continue subject to the original expiry period and all statutory conditions.

This is why MAT-credit ageing should now be reviewed alongside the choice between the old and new corporate tax regimes. A large headline credit balance is not the same as immediately usable cash value.

Transition from the 1961 Act to the 2025 Act

The Income-tax Act, 2025 came into force on 1 April 2026. Section 536 contains the repeal-and-savings framework. It preserves eligible credit relating to tax paid under section 115JAA or section 115JD of the repealed Act for periods beginning before 1 April 2026, subject to the corresponding provisions and the period for which that credit would have remained available under the old law.

For the broader shift from assessment-year terminology to the new tax-year framework, see our earlier guide: Tax Year vs Assessment Year under the Income-tax Act, 2025.

Practical action points for companies and finance teams

• Prepare a year-wise MAT-credit ageing schedule as at 31 March 2026 and identify the expiry year of each tranche.

• Model old-regime tax at the new 14% MAT rate against the tax cost of moving to the concessional/new corporate tax regime.

• Do not assume MAT paid from Tax Year 2026-27 will create a future tax asset; fresh MAT credit is no longer generated in the old regime.

• Where legacy credit exists, model the annual utilisation restriction before treating the full balance as recoverable in cash-flow forecasts.

• Update tax-provision workpapers, deferred-tax assumptions, ERP tax logic and return-compliance checklists for section 206 and Form 66.

• Keep the old section 115JB/115JAA records because pre-1 April 2026 credits and disputes can remain relevant during the transition period.

Frequently asked questions

Is section 206 merely the new number for section 115JB?

No. Section 206 is the new MAT provision, but the Finance Act, 2026 made substantive changes from 1 April 2026. The rate falls to 14% for the old regime, MAT becomes final tax there, and fresh MAT credit is no longer generated.

Does accumulated MAT credit disappear on 1 April 2026?

No. Eligible legacy MAT credit is preserved by the transition provisions. However, companies must apply the new utilisation rules and the original carry-forward life of the credit.

Can a domestic company use old MAT credit while remaining in the old regime?

The post-2026 policy is designed to permit utilisation of accumulated MAT credit when the domestic company shifts to the new regime. Companies should therefore model migration and the applicable annual cap before making tax-regime decisions.

What form replaces Form 29B?

The Income Tax Department's current Form 66 guidance maps old Form 29B under sections 115JA/115JAA/115JB to Form 66 under section 206 of the Income-tax Act, 2025.

Primary sources

• Income-tax Act, 2025 as amended by the Finance Act, 2026 — official Income Tax Department text, including section 206 and section 536.

• Finance Act, 2026 / Budget 2026 Memorandum — Rationalisation of Minimum Alternate Tax provisions.

• Income Tax Department Budget 2026 FAQs — Reforms in MAT (section 206).

• Income Tax Department Form 66 FAQs — mapping of Form 29B / sections 115JA, 115JAA and 115JB to section 206 / Form 66.

• Income-tax Act, 1961 — sections 115JB and 115JAA, as applicable before repeal.

Official references: https://www.incometaxindia.gov.in/en/income-tax-act-2025 ; https://incometaxindia.gov.in/Documents/Budget2026/FAQs-Budget-2026.pdf

Conclusion

The most important MAT change after 1 April 2026 is not the section-number change from the old 115JB/115JAA framework to section 206. It is the shift in economics: a lower 14% MAT rate, but no fresh MAT credit for companies staying in the old regime, coupled with a transition mechanism for legacy credit. Companies with material MAT balances should therefore treat Tax Year 2026-27 as a regime-selection and cash-flow modelling exercise, not simply a compliance renumbering exercise.

PGT & Associates can assist businesses with corporate tax modelling, MAT-credit reconciliation and transition analysis under the Income-tax Act, 2025.

Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Tax outcomes depend on the facts, applicable amendments, notifications and the company's chosen tax regime. Professional advice should be obtained before acting on any MAT or corporate-tax position.