v3.26.1
Income taxes
 12 Months Ended
Mar. 31, 2026
Disclosure of income tax [Abstract]  
Income taxes
24.
Income taxes
 
a.
Income tax expense/(benefit) recognized in the consolidated income statement consists of the following:
 
 
For the Year Ended March 31,
 
 
 
2026
 
 
2025
 
 
2024
 
Current taxes
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
Rs.
9,599
 
 
Rs.
17,909
 
 
Rs.
13,874
 
Foreign
 
 
4,347
 
 
 
4,672
 
 
 
5,584
 
 
 
Rs.
13,946
 
 
Rs.
22,581
 
 
Rs.
19,458
 
Deferred taxes
 
 
       
Domestic
 
Rs.
945
 
 
Rs.
(1,074
)
 
Rs.
968
 
Foreign
 
 
(2,540
)
 
 
(1,968
)
 
 
(4,240
)
 
 
Rs.
(1,595
)
 
Rs.
(3,042
)
 
Rs.
(3,272
)
Tax expense, net
 
Rs.
12,351
 
 
Rs.
19,539
 
 
Rs.
16,186
 
 
b.
Income tax expense/(benefit) recognized directly in other comprehensive (loss)/ income
 
Income tax expense/(benefit) recognized directly in other comprehensive (loss)/income consists of the following:
 
 
 
For the Year Ended March 31,
 
 
2026
 
 
2025
 
 
2024
 
Tax effect on changes in fair value of other investments
 
Rs.
-
 
 
Rs.
-
 
 
Rs.
-
 
Tax effect on effective portion of change in fair value of cash flow hedges
 
 
(428
)
 
 
58
 
 
 
(117
)
Tax effect on foreign currency translation differences
 
 
-
 
 
 
-
 
 
 
-
 
Tax effect on actuarial gains/losses on defined benefit obligations
 
 
45
 
 
 
(24
)
 
 
(4
)
 
 
Rs.
(383
)
 
Rs.
34
 
 
Rs.
(121
)
 
c.
Reconciliation of effective tax rate
 
The following is a reconciliation of the Company’s effective tax rates for the years ended March 31, 2026, 2026 and 2025:
 
 
 
For the Year Ended March 31,
 
 
2026
 
 
2025
 
 
2024
 
Profit before income taxes
 
Rs.
54,817
 
 
Rs.
76,784
 
 
Rs.
71,870
 
Enacted tax rate in India
 
 
25.17
%
 
 
25.17
%
 
 
25.17
%
Computed expected tax expense
 
Rs.
13,797
 
 
Rs.
19,327
 
 
Rs.
18,090
 
Effect of:
 
 
 
 
 
 
 
 
 
 
 
 
Differences between Indian and foreign tax rates
 
Rs.
(577
)
 
Rs.
(241
)
 
Rs.
(749
)
Unrecognized deferred tax assets/(recognition of previously unrecognized deferred tax assets, net)
 
 
(267
)
 
 
2
 
 
 
(817
)
Expenses not deductible for tax purposes
 
 
921
 
 
 
860
 
 
 
612
 
Income exempt from income taxes
 
 
(199
)
 
 
(483
)
 
 
 
(39
)

Foreign exchange differences
 
 
(424
)
 
 
(124
)
 
 
(89
)

Reversal of deferred tax asset on Indexation of land
 


-



473



-

Income from sale of capital assets
 
 
(53
)
 
 
(242
)
 
 
(48
)
Others
 
 
(847
)
 
 
(33
)
 
 
(774
)
Income tax expense
 
Rs.
12,351
 
 
Rs.
19,539
 
 
Rs.
16,186
 
Effective tax rate
 
 
23
%
 
 
25
%
 
 
23
%
 
The Company’s effective tax rate for the year ended March 31, 2026, was lower as compared to the year ended March 31, 2025. This decrease was primarily on account of:
 
a)
an increase in the proportion of the Company’s profits coming from lower tax jurisdictions and a decrease in the proportion of profits from higher tax jurisdictions for the period ended March 31, 2026, as compared to the period ended March 31, 2025; and
b)
the reversal of deferred tax on Indexation of land during the year ended March 31, 2025; and
c)
the recognition of a previously unrecognized deferred tax asset on operating tax losses, during the year ended March 31, 2026.
 
 
 
The Company’s effective tax rate for the year ended March 31, 2025, was higher as compared to the year ended March 31, 2024. This increase was primarily on account of:
 
a)
the reversal of a previously recognized deferred tax asset on indexation of land, consequent to amendments made pursuant to the Finance Act (No.2) 2024 to the Income Tax Act, 1961 in India;
b)
the recognition of a previously unrecognized deferred tax asset on operating tax losses, primarily pertaining to Dr. Reddy’s Laboratories SA, Switzerland during the year ended March 31, 2024; and
c)
an increase in the proportion of the Company’s profits coming from higher tax jurisdictions and a decrease in the proportion of profits from lower tax jurisdictions for the period ended March 31, 2025, as compared to the period ended March 31, 2024.
 
d.
Unrecognized deferred tax assets
 
The details of unrecognized deferred tax assets are summarized below:
 
 
 
As of March 31,
 
 
 
2026
 
 
2025
 
Deductible temporary differences, net
 
Rs.
328
 
 
Rs.
235
 
Operating tax loss carry-forward
 
 
1,457
 
 
 
1,587
 
 
 
Rs.
1,785
 
 
Rs.
1,822
 
 
Deferred tax liability is not provided on undistributed earnings of Rs.48,978 and Rs.43,442 as of March 31, 2026 and 2025, respectively of subsidiaries and joint ventures, where it is expected that earnings of the subsidiaries will not be distributed in the foreseeable future. Generally, the Company indefinitely reinvests all of the accumulated undistributed earnings of subsidiaries, and accordingly, has not recorded any deferred taxes in relation to such undistributed earnings of its subsidiaries.
 
e.
Deferred tax assets and liabilities
 
The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities and a description of the items that created these differences is given below:
 
 
 
As of March 31,
 
 
As of March 31,
 
 
 
2026
 
 
2025
 
Deferred tax assets/(liabilities):
 
Asset
 
 
Liability
 
 
Asset
 
 
Liability
 
Inventories
 
Rs.
6,674
 
 
Rs.
(44
)
 
Rs.
4,650
 
 
Rs.
(24
)
Trade and other receivables
 
 
9,637
 
 
 
-
 
 
 
8,390
 
 
 
-
 
Operating/other tax loss carry-forward
 
 
3,191
 
 
 
-
 
 
 
2,844
 
 
 
-
 
Other current assets and other current liabilities, net
 
 
912
 
 
 
(79
)
 
 
733
 
 
 
(192
)
Lease liabilities
 
 
3,518
 
 
 
-
 
 
 
1,205
 
 
 
-
 
Property, plant and equipment
 
 
-
 
 
 
(6,090
)
 
 
-
 
 
 
(5,067
)
Right of use asset
 
 
-
 
 
 
(3,117
)
 
 
-
 
 
 
(1,102
)
Other intangible assets
 
 
1,098
 
 
 
(9,173
)
 
 
1,533
 
 
 
(8,583
)
Others
 
 
1,564
 
 
 
(1,223
)
 
 
878
 
 
 
(865
)
Tax assets/(liabilities)
 
 
26,594
 
 
 
(19,726
)
 
 
20,233
 
 
 
(15,833
)
Set-off of taxes
 
 
(4,158
)
 
 
4,158
 
 
 
(1,725
)
 
 
1,725
 
Net tax assets/(liabilities)
 
 
22,436
 
 
 
(15,568
)
 
 
18,508
 
 
 
(14,108
)
 
In assessing whether the deferred tax assets will be realized, management considers whether some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets and tax loss carry-forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences and tax loss carry-forwards. Recoverability of deferred tax assets is based on estimates of future taxable income. Any changes in such future taxable income would impact the recoverability of deferred tax assets.
 
Operating loss carry-forward consists of business losses, unabsorbed depreciation and unabsorbed interest carry-forwards. A portion of this total loss can be carried indefinitely and the remaining amounts expire at various dates ranging from 2027 through 2042.
 

f.
Movement in deferred tax assets and liabilities during the years ended March 31, 2026 and 2025
.
 
 
As of March
31, 2025
 
 
Recognized in
income statement
 
 
Recognized in
OCI
 
 
As of March
31, 2026
 
Deferred tax assets/(liabilities):
 
 
 
 
 
 
 
 
 
 
 
 
Inventories
 
Rs.
4,626
 
 
Rs.
2,004
 
 
 
-
 
 
Rs.
6,630
 
Trade and other receivables
 
 
8,390
 
 
 
1,247
 
 
 
-
 
 
 
9,637
 
Operating/other tax loss carry-forward
 
 
2,844
 
 
 
347
 
 
 
-
 
 
 
3,191
 
Other current assets and other current liabilities, net
 
 
541
 
 
 
292
 
 
 
-
 
 
 
833
 
Lease liabilities
 
 
1,205
 
 
 
2,313
 
 
 
-
 
 
 
3,518
 
Right of use asset
 
 
(1,102
)
 
 
(2,015
)
 
 
-
 
 
 
(3,117
)
Property, plant and equipment
 
 
(5,067
)
 
 
(1,023
)
 
 
-
 
 
 
(6,090
)
Other intangible assets
 
 
(7,050
)
 
 
(1,025
)
 
 
-
 
 
 
(8,075
)
Others
 
 
13
 
 
 
(55
)
 
 
383
 
 
 
341
 
Net deferred tax assets
 
Rs.
4,400
 
 
Rs.
2,085
 
 
Rs.
383
 
 
Rs.
6,868
 
 
The details of movement in deferred tax assets and liabilities are summarized below:
 
 
 
As of March
31, 2024
 
 
Recognized
in income
statement
 
 
Recognized
in OCI
 
 
Recognized
on business
combination
 
 
As of March
31, 2025
 
Deferred tax assets/(liabilities):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventories
 
Rs.
4,372
 
 
Rs.
254
 
 
 
-
 
 
 
-
 
 
Rs.
4,626
 
Trade and other receivables
 
 
5,815
 
 
 
2,575
 
 
 
-
 
 
 
-
 
 
 
8,390
 
Operating/other tax loss carry-forward
 
 
2,398
 
 
 
446
 
 
 
-
 
 
 
-
 
 
 
2,844
 
Other current assets and other current liabilities, net
 
 
645
 
 
 
(104
)
 
 
-
 
 
 
-
 
 
 
541
 
Lease liabilities
 
 
854
 
 
 
351
 
 
 
-
 
 
 
-
 
 
 
1,205
 
Right of use asset
 
 
(750
)
 
 
(352
)
 
 
-
 
 
 
-
 
 
 
(1,102
)
Property, plant and equipment
 
 
(3,621
)
 
 
(1,446
)
 
 
-
 
 
 
-
 
 
 
(5,067
)
Other intangible assets
 
 
102
 
 
 
1,331
 
 
 
-
 
 
 
(8,483
)
 
 
(7,050
)
Others
 
 
50
 
 
 
(3
)
 
 
(34
)
 
 
-
 
 
 
13
 
Net deferred tax assets
 
Rs.
9,865
 
 
Rs.
3,052
 
 
Rs.
(34
)
 
 
(8,483
)
 
Rs.
4,400
 
 
The amounts recognized in the consolidated income statement for the years ended March 31, 2026 and 2025 include Rs.490 and Rs.10, respectively, which represent exchange differences arising due to foreign currency translations.
 
g.
Uncertain tax positions – Tax litigations
 
The Company is contesting various disallowances by the Income Tax authorities. The associated tax impact for disallowances being more likely than not to be accepted by tax authorities is Rs.2,935 and Rs.2,875 as of March 31, 2026 and 2025, respectively. Accordingly, no provision is made in these consolidated financial statements as of March 31, 2026.
 
h.
Assessment of exposure to Pillar Two rules
 
Legislation to implement the Pillar Two model rules of the OECD has been enacted or substantively enacted in certain jurisdictions where the Company operates. The legislation is effective for the Company’s reporting year beginning April 1, 2024. The Company is within the scope of the enacted or substantively enacted legislation.
 
The Company’s assessment of the potential exposure to Pillar Two income taxes is based on the most recent country-by-country reporting, income tax returns and financial statements of the constituent entities within the Company.
 
Based on the assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the Company operates are above
 15%,
and thus Pillar Two income taxes would not apply. However, there are a limited number of jurisdictions where the transitional safe harbour relief does not apply, and the Pillar Two effective tax rate is lower than
15%.
This amendment had no material impact on the
se
consolidated financial statements.