---
title: "Minimum Alternate Tax (MAT): How It Works | Model Diplomat"
description: "Minimum Alternate Tax (MAT) ensures Indian companies pay tax on book profits when their regular liability is low, impacting financial planning and compliance."
url: "https://modeldiplomat.com/learn/glossary/minimum-alternate-tax"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Minimum Alternate Tax is an Indian direct tax requiring companies to pay tax on their book profits when their regular income-tax liability falls below a statutory threshold.
- What is the current rate of MAT in India?
- How does MAT credit work?
- How is MAT different from the OECD global minimum tax?
- Does MAT apply to foreign companies and LLPs?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In 2015 India's tax department issued MAT demands on foreign institutional investors, prompting the government to appoint the A.P. Shah Committee, whose recommendations led to the 2016 exemption of foreign companies without a permanent establishment.

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