Bajaj Auto shares in focus as firm to hike provisions for deferred tax

Shares of Bajaj Auto were on investors' radar on Tuesday, August 20, as the two-wheeler major said on Monday it would need to increase its provision for deferred tax by ₹211 crore due to the withdrawal of indexation benefits and a change in the tax rate on long-term capital gains in debt mutual funds.

At 10:12 AM, the stock was trading 0.52% higher at ₹9,821.45 on the BSE.

The company invests its surplus funds into a range of asset classes, including debt mutual funds. Bajaj Auto said in a regulatory filing that it was making accounting provisions for deferred tax as per applicable law on fair value gains on these investments.

A one-time impact will be made while computing the profit after tax and reporting the financial results for Q2 of FY25, it added.

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

Due to the withdrawal of the indexation benefit and the change in tax rate, the accounting provision for the deferred tax on investment income so created needs to be restated, the company said.

The company further said only a provision is being made in the books of accounts at this point in time to record the deferred tax in line with the applicable accounting standards and the recently enacted tax change.

The actual payment of tax would be made at the time of the redemption of these mutual funds. The cash outgo towards tax could be different at the time of redemption depending on the actual gain and the actual prevailing tax regime, it added.