In the Finance Law (No. 2) of 2024, the benefit of indexation has been removed when calculating long-term capital gains of debt mutual funds that were acquired before April 1, 2023, the company said in a filing. | Photo by Milan Masnikosa on Pexels
Maruti Suzuki India on Saturday said it would need to increase provision for deferred tax liabilities by around Rs 850 crore due to 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 from these investments, Maruti Suzuki India said in a regulatory filing.
A one-time impact on after-tax earnings will be felt in the second quarter of the current fiscal year, it added.
In the Finance Act (No. 2) of 2024, the benefit of indexation while calculating long-term capital gains on debt mutual funds that were purchased before April 1, 2023, has been withdrawn, it added.
“Due to the withdrawal of indexation benefit and change in tax rate from 20 per cent plus surcharge and cess (with indexation) to 12.5 per cent plus surcharge and cess (without indexation), the accounting provision for the deferred tax liability so created needs to be restated,” the automaker said.
Accordingly, it said, “The accounting provision for deferred tax liability created by the company as on June 30, 2024 would need to be increased by approximately Rs 8,500 crore, which would have a one-time impact on the company’s profit after tax for the second quarter of FY 2024-25.”
Rahul Bharti, head of investor relations at Maruti Suzuki India, said in a statement that this is just an accounting provision at this stage due to the change in tax rules by removing the benefit of indexation on mark-to-market gains.
“The actual tax payout will occur at a later date as we redeem those mutual funds,” he added.
Bharti said this is not related to operations and will not impact the company’s operating earnings.
“This will impact tax on other income at the respective future dates when we redeem those funds,” he added.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: August 17, 2024 | 10:09 PM IS
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