v3.26.1
Income Taxes
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
16. Income Taxes
Income before income taxes and the provision for income taxes in fiscal 2024, 2025 and 2026 are as follows:
 
    
Millions of yen
  
    
2024
     
2025
    
2026
  
Income before income taxes:
        
Japan
    ¥ 298,321      ¥ 307,830     ¥ 496,631  
Overseas
      171,654        172,633       194,800  
  
 
 
     
 
 
    
 
 
  
   ¥ 469,975      ¥ 480,463     ¥ 691,431  
  
 
 
     
 
 
    
 
 
  
Provision for income taxes:
        
Current—
        
Japan - Total
    ¥ 80,274      ¥ 72,230     ¥ 94,317  
Japan - National tax*
      —         —        72,845  
Japan - Local tax*
      —         —        21,472  
Overseas
      31,114        33,252       48,399  
  
 
 
     
 
 
    
 
 
  
     111,388        105,482       142,716  
  
 
 
     
 
 
    
 
 
  
Deferred—
        
Japan - Total
      9,049        26,803       76,511  
Japan - National tax*
      —         —        63,768  
Japan - Local tax*
      —         —        12,743  
Overseas
      10,951        (3,457 )      13,876  
  
 
 
     
 
 
    
 
 
  
     20,000        23,346       90,387  
  
 
 
     
 
 
    
 
 
  
Total—
        
Japan - Total
      89,323        99,033       170,828  
Japan - National tax*
      —         —        136,613  
Japan - Local tax*
      —         —        34,215  
Overseas
      42,065        29,795       62,275  
  
 
 
     
 
 
    
 
 
  
   ¥ 131,388      ¥ 128,828     ¥ 233,103  
  
 
 
     
 
 
    
 
 
  
 
*
Since fiscal 2026, we have changed the disclosure of the breakdown of income taxes in accordance with Accounting Standards Update 2023-09.
In fiscal 2024, 2025 and 2026, the aggregate statutory income tax rate applicable to the Company and its subsidiaries in Japan is approximately 31.5%. The national statutory income tax rate is approximately 25.6%.
In fiscal 2026, the principal local tax jurisdictions that make up the majority of the Japan local tax, net of national tax effect, category in our rate reconciliation is the Tokyo Metropolitan Government and Osaka Prefecture.
 
Reconciliations of the differences between the tax provision computed at the statutory income tax rate of 31.5%, the aggregate statutory income tax rate of the Company’s tax domicile, and the consolidated provision for income taxes in fiscal 2024 and 2025 are as follows:
 
 
  
Millions of yen
 
 
  
2024
 
 
2025
 
Income before income taxes
  
¥
469,975
 
 
¥
480,463
 
  
 
 
 
 
 
 
 
Tax provision computed at the statutory rate
  
¥
148,042
 
 
¥
151,346
 
Increases (reductions) in taxes due to:
  
 
Change in valuation allowance
  
 
5,441
 
 
 
1,973
 
Nondeductible expenses
  
 
4,762
 
 
 
5,813
 
Nontaxable income
  
 
(3,574
) 
 
 
(5,893
) 
Effect of lower tax rates on certain subsidiaries
  
 
(17,627
) 
 
 
(22,271
) 
Effect of investor taxes on earnings of subsidiaries
  
 
7,674
 
 
 
3,494
 
Effect of the tax law and rate changes
  
 
(1,295
) 
 
 
2,218
 
Effect of sale or liquidation of subsidiaries
  
 
(14,995
) 
 
 
(8,423
) 
Other, net
  
 
2,960
 
 
 
571
 
  
 
 
 
 
 
 
 
Provision for income taxes
  
¥
131,388
 
 
¥
128,828
 
  
 
 
 
 
 
 
 
The effective income tax rate is different from the statutory income tax rate primarily because of certain nondeductible expenses, nontaxable income, changes in valuation allowance, the effect of lower tax rates on certain subsidiaries, effect of investor taxes on earnings of subsidiaries and effect of sale or liquidation of subsidiaries.
Due to the enactment of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No.13 of 2025) in the Japanese Diet on March 31, 2025, the “Special Corporation Tax for National Defense” will be imposed from the fiscal years beginning on or after April 1, 2026. As a result, the statutory income tax rate used to calculate deferred tax assets and liabilities has been changed from approximately 31.0% to approximately 31.9% for temporary differences expected to be resolved from the fiscal year beginning on April 1, 2026. The increase and decrease of the deferred tax assets and liabilities due to the change in the tax rates resulted in an increase of provision for income taxes by ¥6,124 
million in the consolidated statements of income for fiscal 2025.
 
Reconciliations of the differences between the corporate income taxes computed at the Japanese national statutory income tax rate of approximately 25.6%, the national statutory income tax rate in our country of domicile, and the consolidated provision for income taxes in fiscal 2026 was as follows.
 
    
Millions of yen
  
    
2026
  
Income before income taxes
    ¥ 691,431          
  
 
 
    
 
 
  
Tax provision computed at the national statutory income tax rate
    ¥ 177,006       25.6 % 
Japan national tax:
     
Nontaxable and nondeductible items
      (223 )      (0.0 %) 
Tax credits
     
Foreign tax credit
      (9,769 )     (1.4 %
)
Other
      (1,539 )     (0.2 %
)
Effect of the tax law and rate changes
     
1,012
       0.1 % 
Change in valuation allowance
      2,375       0.3 % 
Cross-border tax laws
      10,975       1.6 % 
Other, net
      6,715       1.0 % 
Japan local tax, net of national tax effect
      34,215       4.9 % 
Foreign tax effects
     
The United States
      9,030       1.3 % 
India
     
Direct foreign withholding tax
      10,367       1.5 % 
Other
      138       0.0 % 
Other foreign jurisdictions
      (7,522 )     (1.1 %
)
Worldwide changes in unrecognized tax benefits
      323       0.1 % 
  
 
 
    
 
 
  
Provision for income taxes
    ¥ 233,103       33.7 % 
  
 
 
    
 
 
  
The amounts of taxes paid (net of amounts received) in fiscal 2026 was as follows.
 
    
Millions of yen
  
    
2026
  
Japan national tax
      52,638  
  
 
 
  
Japan local tax
   
Tokyo Metropolitan Government
      8,437  
Other
      9,021  
  
 
 
  
Subtotal
      17,458  
  
 
 
  
Foreign
   
The United States
      10,216  
India
      11,286  
Other
      23,149  
  
 
 
  
Subtotal
      44,651  
  
 
 
  
Total
      114,747  
  
 
 
  
 
Total income tax expense recognized in fiscal 2024, 2025 and 2026 was allocated as follows:
 
    
Millions of yen
  
    
2024
    
2025
    
2026
  
Provision for income taxes
    ¥ 131,388     ¥ 128,828     ¥ 233,103  
Income tax expense (benefit) allocated to other comprehensive income (loss):
       
Net change of unrealized gains (losses) on investment in securities
      (27,157 )      (60,260 )      (88,096 ) 
Net change of impact of changes in policy liability discount rate
      32,471       54,382       100,702  
Net change of debt valuation adjustments
      (74 )      (13 )      78  
Net change of defined benefit pension plans
      5,554       2,063       7,711  
Net change of foreign currency translation adjustments
      (30,992 )      2,484       (12,045 ) 
Net change of unrealized gains (losses) on derivative instruments
      (1,523 )      (441 )      1,016  
Other direct adjustments to shareholders’ equity
      32       22       57  
  
 
 
    
 
 
    
 
 
  
Total income tax expense
    ¥ 109,699     ¥ 127,065     ¥ 242,526  
  
 
 
    
 
 
    
 
 
  
The tax effects of temporary differences and carryforwards giving rise to the deferred tax assets and liabilities as of March 31, 2025 and 2026 are as follows:
 
    
Millions of yen
  
    
2025
    
2026
  
Assets:
     
Net operating loss carryforwards
    ¥ 48,953     ¥ 50,576  
Allowance for credit losses
      14,842       18,565  
Investment in securities
      4,581       4,109  
Accrued expenses
      26,516       23,644  
Investment in operating leases
      11,576       12,597  
Property under facility operations
      28,007       33,551  
Installment loans
      8,075       7,036  
Unrealized losses on investment in securities
      158,375       245,605  
Lease liabilities
      74,215       76,790  
Other*
      159,391       188,081  
  
 
 
    
 
 
  
     534,531       660,554  
Less: valuation allowance
      (35,845 )      (44,262 ) 
  
 
 
    
 
 
  
     498,686       616,292  
 
 
    
Millions of yen
  
    
2025
     
2026
  
Liabilities:
      
Net investment in leases
      12,755        13,524  
Investment in operating leases
      171,455        175,410  
Unrealized gains on investment in securities
      9,259        17,966  
Deferred insurance policy acquisition costs
      90,934        96,048  
Policy liabilities and policy account balances
      263,515        397,682  
Property under facility operations
      33,075        37,326  
Other intangible assets
      143,701        148,872  
Undistributed earnings
      103,808        134,589  
Prepaid benefit cost
      27,224        32,689  
Advances paid
      8,387        9,023  
Right-of-use
assets
      72,034        73,828  
Other
      24,834        43,256  
  
 
 
     
 
 
  
     960,981        1,180,213  
  
 
 
     
 
 
  
Net deferred tax liability
    ¥ 462,295      ¥ 563,921  
  
 
 
     
 
 
  
 
*
As of March 31, 2025 and 2026, other deferred tax assets includes amounts related to net investment hedges of ¥96,778 million and ¥107,235 million.
Net deferred tax assets and liabilities at March 31, 2025 and 2026 are reflected in the accompanying consolidated balance sheets under the following captions:
 
    
Millions of yen
  
    
2025
     
2026
  
Other assets
    ¥ 63,337      ¥ 47,130  
Income taxes: Deferred
      525,632        611,051  
  
 
 
     
 
 
  
Net deferred tax liability
    ¥ 462,295      ¥ 563,921  
  
 
 
     
 
 
  
The valuation allowance is primarily recognized for deferred tax assets of consolidated subsidiaries with operating loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards are utilizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax-planning
strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company and its subsidiaries will realize the benefits of these deductible temporary differences and operating loss carryforwards, net of the existing valuation allowances at March 31, 2026. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The net changes in the total valuation allowance were increases of ¥1,759 million in fiscal 2024, decreases of ¥3,201 million in fiscal 2025, and increases of ¥8,417 million in fiscal 2026. The decrease in the total valuation allowance recognized in earnings due to the utilization of net operating loss carryforwards were ¥3,660 million in fiscal 2024, ¥3,380 million in fiscal 2025 and ¥1,877 million in fiscal 2026. The adjustments to the
beginning-of-the-year
amount in the total valuation allowance resulting from changes in judgment about the
realizability of deferred tax assets in future years were net increases of ¥513 million in fiscal 2024 (increases of ¥4,125 million and decreases of ¥3,612 million on a gross basis), net decreases of ¥1,986 million in fiscal 2025 (increases of ¥1,143 million and decreases of ¥3,129 million on a gross basis), and net increases of ¥2,156 million in fiscal 2026 (increases of ¥2,968 million and decreases of ¥812 million on a gross basis), respectively.
The Company and certain subsidiaries have net operating loss carryforwards of
¥339,611
 million at March 31, 2026, which expire as follows:
 
 
Years ending March 31,
   
Millions of yen
  
2027
    ¥ 6,395  
2028
      1,989  
2029
      17,331  
2030
      45,820  
2031
      64,843  
Thereafter
      147,470  
Indefinite period
      55,763  
  
 
 
  
Total
    ¥ 339,611  
  
 
 
  
The unrecognized tax benefits as of March 31, 2025 and 2026 were not material.
The total amounts of penalties and interest expense related to income taxes recognized in the consolidated balance sheets as of March 31, 2025 and 2026, and in the consolidated statements of income for fiscal 2024, 2025 and 2026 were not material.
The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions. The Company is no longer subject to ordinary income tax examination in Japan for the tax years prior to fiscal 2025, and its major domestic subsidiaries are no longer subject to ordinary income tax examination for the tax years prior to fiscal 2018, respectively.
Subsidiaries in the United States remain subject to an income tax examination for the tax years after fiscal 2020. Subsidiaries in the Netherlands remain subject to an income tax examination for the tax years after fiscal 2018.