MAT - New Tax for Indian Software and Outsourcing Industry in Union Budget 2006 2007

India's export-oriented enterprises such as in the thriving software outsourcing industry were brought back under the tax net in the annual federal budget unveiled on Wednesday. Finance Minister Palaniappan Chidambaram proposed to extend minimum alternate tax (MAT) to firms claiming deductions under sections 10A and 10B of the Income Tax Act.

Now, they must pay the minimum tax, still lower than a full-fledged corporate income tax, practically seeing an end to their tax holiday status conferred years ago.

Chidambaram, in his earlier tenure as finance minister a decade ago, introduced MAT as a way of taxing companies that weren't paying any tax by availing various concessions.

But a 10-year tax holiday had still kept the software industry from its coverage.