Maruti Suzuki To Take Rs 850 Crore Hit In Q2 Profit After Budget 2024 Removes Indexation Benefit
So far, Maruti Suzuki was stating gains from debt mutual fund investments as deferred tax liability.
Maruti Suzuki India Ltd. will take a one-time hit to its bottom line in the fiscal second quarter due to a change in how tax is calculated on debt mutual fund investments.
There will be a one-time impact of Rs 850 crore on profit after tax in the July-September quarter of the fiscal 2025 due to removal of the indexation benefit on debt mutual funds in Budget 2024, India’s largest carmaker said in an exchange filing on Saturday.
"This is only an accounting provision at this stage due to the change of tax rules (in the budget)," Rahul Bharti, chief investor relations officer at Maruti Suzuki, told NDTV Profit. "This is not related to operations and will not Impact our operational profit. It will affect the ‘tax on other income’ in respective future dates whenever we redeem those funds."
Finance Minister Nirmala Sitharaman, in her annual budget speech last month, said that the long-term capital gains on debt mutual funds held for more than three years will be taxed at a flat rate of 12.5% without indexation benefits. The short-term capital gains on debt mutual funds held for less than three years will be taxed according to the income tax slab.
So far, Maruti Suzuki was stating gains from debt mutual fund investments as deferred tax liability. The removal of the indexation benefit increases the deferred tax liability by Rs 850 crore in April-June 2024.
The actual payment of tax would be made at the time of redemption of these mutual funds. This amount will be calculated based on the actual gain and applicable tax rate at the time of redemption.
For the quarter ended June, Maruti Suzuki has reported a net profit that rose 47% year-on-year to Rs 3,650 crore on the back of revenue that increased 10% to Rs 35,531 crore.
The operational profitability—calculated as earnings before income tax, depreciation and amortisation—rose 50.9% to Rs 4,502 crore. The margin expanded 350 basis points to 12.7%.
