Question

Considering the current tax modifications, should we apply AMTI to taxpayers? Please, explain your position with examples.

Answer 1

ANSWER:

AMTI(Alternative Minimum Tax Income): This is a tax that ensures that the taxpayers pay at least the minimum amount of tax. The AMT recalculates the income after adding up certain tax preference items** into gross income.

The AMT exemption for an individual in 2020 is 72,900 whereas for a married joint fillers it is 1,13,400. Taxpayers have to complete Form 6251 to see whether they might owe AMT. First, they get to subtract the exemption amount ($72,900). If their AMT is less than the exemption, they do not have to pay AMT. For married couples filing jointly, the AMT has to exceed $191,500 and the exemption figure is $113,400.

Yes, for a fair tax payment of any individual(especially the wealthy part of the society) the AMT should be levied as this creates a fair chance for the payment of the tax for the individual and prevents from any fradulent activity in the economy.

** Tax preference items include interest on private activity municipal-bonds, qualifying exclusions for small business stock, and excess intangible drilling costs for oil and gas - if the amount of these items exceeds 40% of AMT income.

For example:

Particulars	FY 1	FY 2
Taxable income (A)	19,30,000	20,50,000
Add: Deduction claimed if any under Chapter VI-A from 80H to 80RRB except 80P (B)	1,00,000	Nil
Deduction claimed if any under Section 10AA (C)	75,000	25,000
Deduction claimed if any under Section 35AD reduced by regular depreciation allowed (D)	4,50,000	Nil
Adjusted total income (E) = (A)+(B)+(C)+(D)	25,55,000	20,75,000
AMT – (18.5% of (E) plus education cess @ 3%) (F)	4,91,582	3,99,230

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