Minimum Alternate Tax (MAT) Credit is allowed for the excess of MAT paid over the normal income tax payable.  As payment of direct tax in the form of MAT only arises when MAT calculated is more than the income tax payable under the normal provisions of the income tax act, MAT credit is entitled every time MAT is paid.  It is a relief allowed to the tax payer for the excess tax that has been paid due to the provision of MAT under section 115JB of the Income Tax Act, 1961.

 No interest is however allowed on the MAT Credit so available to the company.

 For example:

 Say, Tax payable as per MAT Provisions                 = ₹100
Tax payable as per Normal Provisions                            = ₹  80

MAT is payable in this case as tax payable as per MAT Provision is higher than the tax payable as per Normal Provision. Section 115JAA of the Income Tax Act, 1961 allows MAT Credit of  ₹20 i.e., the excess of MAT over Normal Tax (₹100 - ₹80)

This MAT credit so allowed can be carried forward for a period of 10 years as per Section  115JAA of Income Tax Act, 1961. For accounting of MAT and the credit available click here. 

MAT credit can be utilized by the company by adjusting against future normal income tax liability.  If however the company couldn't pay tax under normal provisions  within the next five assessment years, the MAT credit available lapses.

MAT credit can only be utilized to an extent of excess of normal income tax payable over tax as per MAT provisions in a future assessment year as per Section 115JAA of  the Income Tax Act, 1961.  Any such credit which remains underutilized shall lapse at the end of 10 assessment years.

For example in the next year:

 Say, Tax payable as per MAT Provisions                 = ₹ 280
Tax payable as per Normal Provisions                            = ₹ 285
MAT Credit of last year available                                   = ₹   20

 In this case,
Excess of normal tax over MAT is ₹ 5 (₹285 - ₹280). MAT credit can be utilized to this extent of ₹ 5.
Net Tax payable would be ₹ 280 (₹285 - ₹5). MAT credit still available would be ₹15 (₹20 - ₹5)

 And if in the year there after:

 Say, Tax payable as per MAT Provisions                 = ₹ 165
Tax payable as per Normal Provisions                            = ₹ 210
MAT Credit of last year available                                   = ₹   15

 In this case,
Excess of normal tax over MAT is ₹ 45 (₹210 - ₹165). But MAT credit available is only ₹15.
Net Tax payable would be ₹ 195 (₹210 - ₹15). MAT credit still available would be ₹0 (₹20 - ₹20).

 However if the company is not able to utilize MAT credit, it lapses and should be accounted in this manner.

 An illustrative example is given for making the understanding clear:
Year  Tax payable as per Normal Provisions   Tax payable as per MAT Provisions   Tax payable    MAT Credit carried forward    MAT Credit which can be adjusted   MAT Credit elapsed   MAT Carried forward at the year end   Net outflow of Tax paid 
1                            -                       55,000      55,000              55,000                           -                  -                           55,000         55,000
2                            -                       75,000      75,000              75,000                           -                  -                         130,000         75,000
3                            -                     100,000     100,000            100,000                           -                  -                         230,000        100,000
4                            -                     125,000     125,000            125,000                           -                  -                         355,000        125,000
5                            -                     150,000     150,000            150,000                           -                  -                         505,000        150,000
6                            -                     175,000     175,000            175,000                           -                  -                         680,000        175,000
7                            -                     200,000     200,000            200,000                           -                  -                         880,000        200,000
8                            -                     250,000     250,000            250,000                           -                  -                      1,130,000        250,000
9                            -                     275,000     275,000            275,000                           -                  -                      1,405,000        275,000
10                            -                     300,000     300,000            300,000                           -                  -                      1,705,000        300,000
11                    400,000                   350,000     400,000                     -                       50,000            5,000                    1,650,000        350,000
12                    750,000                   400,000     750,000                     -                     350,000                -                      1,300,000        400,000
13                 1,000,000                   500,000  1,000,000                     -                     500,000                -                         800,000        500,000
14                 1,250,000                   600,000  1,250,000                     -                     650,000                -                         150,000        600,000
15                 1,500,000                   100,000  1,500,000                     -                     150,000                -                                 -       1,350,000

TLDR:
  1. MAT Credit = MAT Paid -  Income tax as per normal provisions.
  2. No interest on MAT Credit.
  3. MAT Credit can be carried forward for ten assessment years
  4. MAT Credit can be adjusted against future income tax liability.
  5. MAT Credit utilization = Income tax as per normal provisions - Income tax as per MAT provisions