Bajaj Auto faces ₹211 crore tax hit due to indexation removal

20 Aug 2024 , 12:17 PM

On Monday, Bajaj Auto Ltd announced that the removal of the indexation advantage and the modification of the tax rate on long-term capital gains on debt mutual funds would necessitate an increase of ₹211 crore in the company’s deferred tax reserve.

The business allocates its excess capital to a variety of asset types, such as debt mutual funds. Bajaj Auto stated in a regulatory filing that it was making accounting provisions for deferred tax on fair value gains on these investments in accordance with applicable law.

It further stated that there will be a one-time impact when presenting the financial results for Q2 of FY25 and calculating the profit after tax.

According to Bajaj Auto, the Finance (No 2) Act 2024 eliminates the indexation benefit for debt mutual funds acquired prior to April 1, 2023, on long-term capital gains.

“Further, the tax rate with respect to long-term capital gains for the said asset class has been changed from 20% plus surcharge and cess (with indexation) to 12.5% plus surcharge and cess (without indexation),” it stated.

The corporation indicated that the accounting provision for Deferred Tax on Investment Income, which was established, must be restated due to the removal of the indexation advantage and the alteration in the tax rate.

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