Minimum Tax Regime
Sets a floor. If normal tax is lower than the minimum, the minimum is payable. Some withholding taxes are themselves treated as minimum tax.
Where it applies
- Resident companies and PEs of non-resident companies (turnover tax)
- Individuals and AOPs with turnover of Rs 100 million or more
- Importers (s.148) and suppliers, service providers and contractors (s.153) where the tax is specified as minimum
How it works, step by step
The section of law behind each step is shown beside it.
- 1Compute normal taxs.4
Work out tax on taxable income under the NTR.
- 2Compute turnover taxs.113(1), Div IX
Multiply turnover from all sources by the Div IX rate (1.25% general; 0.75%, 0.5% or 0.25% for specified sectors).
- 3Pay the higher amounts.113(1) Explanation
If normal tax is lower, pay the minimum. Tax on FTR income and super tax are left out of the comparison.
- 4Carry forward the excesss.113(2)(c)
Turnover tax paid above normal tax is carried forward and adjusted against normal tax for the next 2 tax years.
- 5Withholding as minimum taxs.148(7), s.153(3)
Where the law says the deduction is minimum tax, it can't be refunded even if your actual tax is lower.
Rates and rules
| Case | Rate / rule | Law |
|---|---|---|
| General turnover tax | 1.25% of turnover | Div IX |
| Specified sectors | 0.75%, 0.5% or 0.25% depending on the sector | Div IX |
| Carry-forward of excess | 2 tax years (Finance Act 2025) | s.113(2)(c) |
| Who it applies to | Companies; individuals and AOPs with turnover of Rs 100 million or more | s.113(1) |
Worked example
A company with turnover of Rs 600 million and taxable income of Rs 20 million: normal tax at 29% is Rs 5.8 million and turnover tax at 1.25% is Rs 7.5 million. It pays Rs 7.5 million and carries forward Rs 1.7 million.
Points to watch
- SMEs under the Fourteenth Schedule are excluded from s.113.
- Compare with ACT under s.113C for companies; the highest of normal tax, minimum tax and ACT is payable.