Further, drugmaker Biocon had a tax outgo of ₹20 crore during the quarter as the company wrote off deferred tax assets created towards indexation benefits on land. Bajaj Auto’s total tax outgo increased by 63% year-on-year to ₹920 crore.
Generally, companies park their surplus funds into a range of asset classes, including debt mutual funds, index funds and fixed maturity plans.
For instance, the mutual fund investments of Maruti Suzuki are valued at ₹3,912 crore as of March 2024. Similarly, the value of mutual fund investments by Bajaj Auto stood at ₹3,695 crore at the end of FY24.
However, it is to be noted that only provisions are being made in the books of accounts at this point in time to reflect the change in tax rates. The actual payment of tax would happen at the time of redemption of these assets.
“The cash outflow towards tax could be different at the time of redemption depending on the actual gain and prevailing tax regulations,” said Bajaj Auto in an exchange filing.
Both Maruti Suzuki and Bajaj Auto disappointed the Street with lower-than-estimated earnings. While the net profit of Maruti Suzuki declined by 17% to ₹3,069 crore, Bajaj Auto reported a net profit of ₹2,005 crore against a Bloomberg consensus estimate of ₹2,203 crore for the quarter.
The September quarter also witnessed Biocon posting its first quarterly loss in seven quarters. The company’s loss for the quarter stood at ₹16 crore against last year’s profit of ₹126 crore.
The Finance Act 2024 had withdrawn the indexation benefit on long-term capital gains on debt mutual funds which were purchased prior to April 2023.
The long-term capital gains for the asset class including mutual funds and property were changed from 20% plus surcharge and cess (with indexation) to 12.5% plus surcharge and cess (without indexation).
Indexation allows a taxpayer to neutralise the impact of inflation while paying tax on capital gains.