he Union Budget 2026-27, presented on February 1, 2026, introduced a significant overhaul of the Minimum Alternate Tax (MAT) framework. The primary goal of these changes is to simplify the corporate tax structure and strongly nudge companies toward the New Tax Regime (concessional tax regime).
The key changes regarding MAT and MAT Credit are summarized below:
1. Reduction in MAT Rate
The statutory MAT rate has been reduced from 15% to 14% (plus applicable surcharge and cess). This applies to both domestic and foreign companies for the financial year starting April 1, 2026.
2. MAT as a “Final Tax”
The most radical shift is that from April 1, 2026, MAT is proposed to be treated as a final tax for companies remaining in the old regime.
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No Fresh Credit: Unlike previous years, where paying MAT created a “credit” that could be used later, no new MAT credit will be allowed to accumulate for taxes paid from the 2026-27 tax year onwards.
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End of Accumulation: The era of building up MAT credit to offset future normal tax liabilities is effectively ending.
3. Utilization of Accumulated MAT Credit
For companies that already have MAT credit accumulated up to March 31, 2026, the budget provides specific (and more restrictive) rules for its use:
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Restricted to New Regime: Set-off of brought-forward MAT credit is now proposed to be allowed only to companies that transition to the New Tax Regime.
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Usage Cap: Even after switching to the new regime, you cannot use the entire credit at once. The set-off is limited to 25% (one-fourth) of the tax liability in a given year.
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15-Year Window: The credit still follows the existing 15-year carry-forward rule from the year it was originally generated. If not used within this window (and under the new 25% annual cap), it will lapse.
Summary Table: MAT Changes at a Glance
| Feature | Old Provision (Pre-Budget 2026) | New Provision (Post-Budget 2026) |
| MAT Rate | 15% | 14% |
| Credit Generation | Allowed (Difference between MAT & Normal Tax) | Discontinued (Starting April 1, 2026) |
| Credit Utilization | Against future normal tax (unrestricted amount) | Only in New Regime (Capped at 25% of tax) |
| Carry Forward | 15 Years | 15 Years (from year of origin) |
| Nature of Tax | Advance tax mechanism | Final Tax |
Example : Existing MAT Credit + Switching to New Regime
Assumptions
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MAT credit available as on 31 Mar 2026: ₹100 lakhs
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Company switches to new corporate tax regime (concessional 22% regime) in FY 2026-27
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Regular tax liability (normal tax) under new regime for FY 2026-27: ₹40 lakhs
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MAT credit carryforward limit per year = 25% of tax liability = 25% × ₹40 lakhs = ₹10 lakhs
Set-off & Computation
| Component | Amount (₹) |
|---|---|
| Regular tax liability | 40 lakhs |
| MAT credit used (max 25%) | 10 lakhs |
| Tax payable after credit | 30 lakhs |
📌 Result
✔ Company reduces its tax outgo by ₹10 lakhs using MAT credit.
✔ Remaining MAT credit = ₹100 lakhs − ₹10 lakhs = ₹90 lakhs (carried forward).
✔ It can be used in future years but again only up to 25% of that year’s tax liability.
✔ Total usable credit depends on tax liability each year and the 15-year carryforward limit.