Minimizing Tax Liability: A Strategic Approach for Businesses

This article explores strategies businesses can use to minimize their tax liability through effective planning.

Understanding Minimum Tax, Unabsorbed Depreciation & Brought Forward Losses:

These concepts are crucial for tax planning, especially for companies with:

  • Minimum Tax: A fixed minimum tax based on turnover, regardless of profit.
  • Unabsorbed Depreciation: Depreciation expenses not fully utilized against taxable income.
  • Brought Forward Losses: Business losses from previous years.

The Planning Process:

  1. Calculate Taxable Income: Start by calculating taxable income after deducting business income, unabsorbed depreciation, and brought forward losses.

  2. Compare Taxable Income with Minimum Tax:

    • If taxable income is lower than minimum tax, you can claim Minimum Tax Credit.
  3. Minimum Tax Credit: This credit allows you to offset the difference between minimum tax and the actual tax liability calculated on taxable income.

Crucial Points:

  • Minimum Tax Credit is based on previous year’s normal tax paid.
  • Unused Minimum Tax Credit can be carried forward for 3 years.
  • Strategic use of deductions and credits can reduce taxable income below the minimum tax threshold.


  • Reduced current tax liability.
  • Carry-forward of unused credit for future tax optimization.

Planning Considerations:

  • Adjusting advance tax payments throughout the year can further optimize tax liability.
  • Professional advice is recommended for complex situations.


By understanding minimum tax, unabsorbed depreciation, and brought forward losses, businesses can implement strategic tax planning to minimize their current tax burden and optimize future tax liabilities.

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