Maruti Suzuki Shares remained subdued on Monday as investors feared a one-time tax hit to the automaker’s balance sheet due to a change in tax accounting rules.

What happened: India’s largest passenger car maker expects a one-time impact of up to Rs 850 crore on its net profit in the current September quarter due to changes in long-term capital gains tax (LTCG) related to pension funds introduced in Budget 2024.

The cut is linked to the withdrawal of indexation benefits in the calculation of the LTCG for pension funds acquired before April 1, 2023. This change, implemented in the 2024 budget, changes the tax calculation from 20% plus surcharge and levy with indexation to 12.5% ​​plus surcharge and levy without indexation.

Maruti Suzuki said that to comply with the regulations, it makes accounting provisions for deferred tax liabilities on fair value gains from these investments. Due to the change in tax regulations, these provisions now have to be adjusted.

The company clarified that the tax payment will be made upon refund of the funds and that the final tax amount may vary from the original estimate of Rs 850 crore depending on the actual profit and the tax rate applicable at the time of refund.

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Tax headache: For the June quarter, Maruti Suzuki reported a consolidated deferred tax expense of ₹103.7 crore in its profit and loss account.

Rahul BhartiThe company’s chief investor relations officer said these tax implications are not related to the company’s operations and will not affect operating profits. Instead, they will affect taxes on other income at the respective future dates when the funds are redeemed.

Maruti Suzuki’s net profit rose 47% to ₹3,650 crore in the June quarter compared to the same period last year. Revenue for the quarter rose 10% to ₹35,531 crore compared to the same period last year.

The company’s EBITDA margin increased nearly 350 basis points to 12.5% ​​from 9.2% in the year-ago quarter, reflecting a lower base and lower raw material costs.

Price promotion: Maruti Suzuki shares were almost unchanged at ₹12,209.10 in early trade on Monday. The stock has gained nearly 20% so far this year.

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