Maruti to raise deferred tax liability provision by ₹850 crore in Q2

BUSINESS: Maruti Suzuki India on Saturday said it will need to increase provision for deferred tax liability by about Rs 850 crore due to withdrawal of indexation benefit while calculating long-term capital gains on debt mutual funds. Maruti Suzuki India said in a regulatory filing that the company was making accounting provision for deferred tax liability on fair value gains on these investments. It said the one-time impact on profit after tax will be felt in the second quarter of the current fiscal. “Due to 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 deferred tax liability needs to be restated,” the automaker said. As a result, 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 million, which would have a one-time impact on the company’s profit after tax for the second quarter of FY 2024-25.” Rahul Bharti, chief investor relations officer, Maruti Suzuki India, said in a statement that this is only an accounting provision at this stage, as tax rules have changed by removing indexation benefit on mark to market gains. “The actual tax outflow will happen later on future dates when we redeem those mutual funds,” he added.