Maruti Suzuki To Increase Deferred Tax Liability Provisions in Q2 FY2025

Maruti Suzuki India has announced a significant one-time impact on its profit after tax due to the withdrawal of indexation benefits on long-term capital gains from debt mutual funds. This change, introduced in the Finance (No.2) Act 2024, necessitates an increase in deferred tax liability by approximately ₹850 crore.

The removal of the indexation benefit and the subsequent increase in the tax rate from 20% to 12.5% have necessitated a reassessment of the company’s deferred tax liability. While this adjustment will impact the profit after tax for the second quarter of the current fiscal year, it’s important to note that this is purely an accounting provision and will not affect the company’s operational profitability.

The actual tax outflow will occur in the future when the company redeems its debt mutual fund investments. Maruti Suzuki has clarified that the change in tax rules does not impact its core business operations.

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.

This development underscores the importance of staying updated with evolving tax regulations for businesses operating in India. While the one-time tax provision may impact short-term profitability, Maruti Suzuki’s underlying operational performance remains unaffected.

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