Bajaj Auto Faces Deferred Tax Provision Increase Due to Tax Changes

Bajaj Auto Ltd announced an increased provision of Rs 211 crore for deferred tax due to the Finance Act 2024 altering long-term capital gains tax rates and withdrawing indexation benefits on debt mutual funds. This will impact the company's Q2 FY25 financial results.

Bajaj Auto Ltd announced on Monday that it will increase its provision for deferred tax by Rs 211 crore. This adjustment stems from the Finance (No 2) Act 2024, which withdraws the indexation benefit and modifies the tax rate on long-term capital gains from debt mutual funds.

The company, which invests its surplus funds in various asset classes including debt mutual funds, made provisions for deferred tax as per the existing laws. However, the new tax rules necessitate a one-time impact on the profit after tax and will be reflected in the financial results for Q2 of FY25.

Bajaj Auto explained that the tax rate for long-term capital gains has changed from 20 percent with indexation to 12.5 percent without indexation. Consequently, the accounting provision for deferred tax must be increased to recognize this change. The actual tax payment will occur at the time of mutual fund redemption, and may vary based on actual gains and the tax regime in place at that time.

(With inputs from agencies.)