MAT made final tax from April 2026: What does that mean under Union Budget 2026 tax overhaul
Under the proposed changes, companies paying MAT will no longer be allowed to carry forward or utilise MAT credit beyond April 1, 2026. Until now, firms that paid MAT, typically due to exemptions or incentives lowering their regular tax liability, could carry forward the excess tax paid and set it off against future regular tax dues.
- Feb 1, 2026,
- Updated Feb 1, 2026 2:52 PM IST
In a significant overhaul of the Minimum Alternate Tax (MAT) framework, the Union Budget 2026 has proposed to make MAT a final tax from April 1, 2026, while simultaneously lowering the applicable rate. The move represents a structural shift in corporate taxation and is aimed at simplifying compliance while nudging companies toward the newer, lower corporate tax regime.
Under the proposed changes, companies paying MAT will no longer be allowed to carry forward or utilise MAT credit beyond April 1, 2026. Until now, firms that paid MAT, typically due to exemptions or incentives lowering their regular tax liability, could carry forward the excess tax paid and set it off against future regular tax dues. With MAT now becoming a terminal levy, this long-standing credit mechanism will be discontinued.
To partially offset the impact of making MAT a final tax, the Budget has proposed a reduction in the MAT rate from 15% to 14% of book profits. This rate cut provides some relief to companies that continue to fall under the MAT net, even as the overall structure becomes more streamlined.
The Budget also announced that non-resident taxpayers will be exempt from MAT, aligning their tax treatment with the broader reforms underway. This exemption is expected to benefit foreign companies and investors operating in India, particularly those covered under presumptive taxation provisions.
The revised MAT framework will take effect from the assessment year beginning April 1, 2026, subject to the passage of the relevant legislative amendments. Notably, companies transitioning to the new corporate tax regime will be permitted to utilise existing brought-forward MAT credit, though such set-offs will be capped at one-fourth of their annual tax liability. No fresh MAT credit will accrue after the cut-off date.
Tax experts have largely welcomed the move, describing it as a long-overdue step toward clarity and predictability in corporate taxation. Sneha Pai, Senior Director – Direct Tax at Nexdigm, said that with MAT becoming a final tax, the 22% concessional corporate tax regime becomes more attractive for companies. She added that as this is a transition year from the old Income-tax Act to the Income Tax Act, 2025, implementation of these changes will be closely watched.
Commenting on the broader Budget measures, Amisha Vora, Chairperson and Managing Director of PL Capital – Prabhudas Lilladher, described the proposals as highly positive. She noted that along with the reduction in buyback tax, the long-pending issue of MAT credit has finally been addressed, which should bring relief to corporate India.
The MAT overhaul is expected to particularly impact capital-intensive and old-economy firms that have accumulated large MAT credits over the years. By removing the credit carry-forward mechanism and lowering the rate, the government is clearly signalling its intent to push companies toward the simplified new tax regime.
Beyond MAT, the Union Budget 2026 also placed emphasis on sectoral growth and investment, including targeted support for textiles, a ₹10,000 crore fund for MSMEs, and an increase in public capital expenditure to ₹12.2 lakh crore—reinforcing its focus on growth alongside tax reform.
Track live Budget updates, breaking news, expert opinions and in-depth analysis only on BusinessToday.in
In a significant overhaul of the Minimum Alternate Tax (MAT) framework, the Union Budget 2026 has proposed to make MAT a final tax from April 1, 2026, while simultaneously lowering the applicable rate. The move represents a structural shift in corporate taxation and is aimed at simplifying compliance while nudging companies toward the newer, lower corporate tax regime.
Under the proposed changes, companies paying MAT will no longer be allowed to carry forward or utilise MAT credit beyond April 1, 2026. Until now, firms that paid MAT, typically due to exemptions or incentives lowering their regular tax liability, could carry forward the excess tax paid and set it off against future regular tax dues. With MAT now becoming a terminal levy, this long-standing credit mechanism will be discontinued.
To partially offset the impact of making MAT a final tax, the Budget has proposed a reduction in the MAT rate from 15% to 14% of book profits. This rate cut provides some relief to companies that continue to fall under the MAT net, even as the overall structure becomes more streamlined.
The Budget also announced that non-resident taxpayers will be exempt from MAT, aligning their tax treatment with the broader reforms underway. This exemption is expected to benefit foreign companies and investors operating in India, particularly those covered under presumptive taxation provisions.
The revised MAT framework will take effect from the assessment year beginning April 1, 2026, subject to the passage of the relevant legislative amendments. Notably, companies transitioning to the new corporate tax regime will be permitted to utilise existing brought-forward MAT credit, though such set-offs will be capped at one-fourth of their annual tax liability. No fresh MAT credit will accrue after the cut-off date.
Tax experts have largely welcomed the move, describing it as a long-overdue step toward clarity and predictability in corporate taxation. Sneha Pai, Senior Director – Direct Tax at Nexdigm, said that with MAT becoming a final tax, the 22% concessional corporate tax regime becomes more attractive for companies. She added that as this is a transition year from the old Income-tax Act to the Income Tax Act, 2025, implementation of these changes will be closely watched.
Commenting on the broader Budget measures, Amisha Vora, Chairperson and Managing Director of PL Capital – Prabhudas Lilladher, described the proposals as highly positive. She noted that along with the reduction in buyback tax, the long-pending issue of MAT credit has finally been addressed, which should bring relief to corporate India.
The MAT overhaul is expected to particularly impact capital-intensive and old-economy firms that have accumulated large MAT credits over the years. By removing the credit carry-forward mechanism and lowering the rate, the government is clearly signalling its intent to push companies toward the simplified new tax regime.
Beyond MAT, the Union Budget 2026 also placed emphasis on sectoral growth and investment, including targeted support for textiles, a ₹10,000 crore fund for MSMEs, and an increase in public capital expenditure to ₹12.2 lakh crore—reinforcing its focus on growth alongside tax reform.
Track live Budget updates, breaking news, expert opinions and in-depth analysis only on BusinessToday.in