Maruti To Raise Deferred Tax Liability Provision By Rs 850 Crore In Q2 On Indexation Removal

Maruti Suzuki India on Saturday said it would need to increase provision for deferred tax liability by around Rs 850 crore due to the withdrawal of indexation benefit while calculating long-term capital gains on debt mutual funds. The company was making accounting provisions for deferred tax liability on fair value gains on these investments, Maruti Suzuki India said in a regulatory filing.

A one-time impact on profit after tax will be felt in the second quarter of the ongoing fiscal, it added. In the Finance (No.2) Act 2024, the indexation benefit has been withdrawn while calculating long term capital gains on debt mutual funds which were purchased prior to April 1, 2023, it added.

"Due to withdrawal of indexation benefit and change in rate of tax from 20 per cent plus surcharge and cess (with indexation) to 12.5 per cent plus surcharge and cess (without indexation), accounting provision for deferred tax liability so created needs to be restated," the automaker said.

Consequently, it said, "The accounting provision for deferred tax liability created by the company as on June 30, 2024 would need to be increased approximately by Rs 8,500 million thereby having a one time impact on the profit after tax of the company for Q2 of FY 2024-25."

Maruti Suzuki India Chief Investors Relations Officer Rahul Bharti in a statement said this is only an accounting provision at this stage due to the change of tax rules by removing the Indexation benefit on the mark to market gains. "The actual tax outflow will happen subsequently at future dates as and when we redeem those mutual funds," he added.

Bharti asserted that this is not related to operations and will not impact the company's operational profit. "It will affect the tax on other income in respective future dates whenever we redeem those funds," he added.