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Meaning of Profit After Tax (PAT), Formula & How to Calculate

What Is Profit After Tax (PAT)?

How Profit After Tax (PAT) is important for a Company?

What is the Formula to Calculate Profit After Tax (PAT)?

 

Now that you have a basic understanding of Profit After Tax, you must be wondering about its calculation process. The following section will give you an idea of the formula for Profit After Tax.

Profit After Tax = Profit Before Tax - Tax rate

Profit Before Tax (PBT): One can calculate it by considering total expenses, including operating and non-operating. It is then excluded from the Total revenue (operating and non-operating revenue).

Tax rate: The taxation is calculated based on PBT, while the geographical location of a company determines its tax rate.

An example will help you understand the formula of Net Profit After Tax further-

IABC Pvt Ltd earns annual revenue of ₹ 50,000. Its operating and non-operating expenses are ₹ 15,000 and ₹ 5,000, respectively. The tax rate is at about 30%.

Particulars

Amount

Annual revenue

₹ 50,000

Operating expenses

₹ 15,000

Non-operating

₹ 5,000

Tax rate

30%

Profit Before Tax (₹ 50,000 - ₹ (15,000 + 5,000)

₹ 30,000

Taxable amount (30% of ₹ 30,000)

₹ 9,000

Profit After Tax (₹ 30,000 - ₹ 9,000)

₹ 21,000

 

Thus, PAT of ABC Pvt Ltd is ₹ 21,000.

What Is the Significance of Profit After Tax (PAT)?

What Are the Advantages of Profit After Tax (PAT) Measures?

What Are the Disadvantages of Profit After Tax (PAT) Measures?

FAQs about Profit After Tax