21. Income taxes

Income tax expense is comprised of the following:


	Years ended March 31,
	2013			2014			2015			2015
	(In millions)
Current income tax expense	Rs.	35,848.5		Rs.	44,324.2		Rs.	54,954.4		US$	882.0
Deferred income tax (benefit) expense*		(4,881.7	)		(1,994.6	)		(352.1	)		(5.7	)
Interest on income tax refund		(1,126.7	)		(25.4	)		(82.4	)		(1.3	)


Income tax expense**	Rs.	29,840.1		Rs.	42,304.2		Rs.	54,519.9		US$	875.0

*	Includes deferred income tax benefits on the amortization of intangible assets of Rs. 747.7 million, Rs. 495.6 million and Rs. 74.4 million for fiscals March 31, 2013, March 31, 2014 and March 31, 2015, respectively.

Does not include the deferred tax effects of unrealized gains and losses on available for sale securities that are included in accumulated other comprehensive income of Rs. (3,771.9) million, Rs. 6,310.3 million and Rs. (11,425.5) million for fiscals March 31, 2013, March 31, 2014 and March 31, 2015, respectively. Includes income tax effects on reclassification adjustment on gains and losses on available for sale securities included in net income reclassified from accumulated other comprehensive income of Rs. 103.8 million, Rs. 10.0 million and Rs. (69.5) million for fiscals March 31, 2013, March 31, 2014 and March 31, 2015, respectively. Further, pretax income and income tax expense are substantially from India.

The following is the reconciliation of estimated income taxes at the Indian statutory income tax rate to income tax expense as reported:


	Years ended March 31,
	2013			2014			2015			2015
	(In millions)
Income before income tax expense	Rs.	91,974.8		Rs.	121,750.4		Rs.	154,024.6		US$	2,471.9
Statutory income tax rate		32.45	%		33.99	%		33.99	%		33.99	%
Expected income tax expense		29,841.2			41,383.0			52,353.0			840.2
Adjustments to reconcile expected income tax to actual tax expense
Interest on income tax refund, net of tax effect		(761.1	)		(16.8	)		(54.4	)		(0.9	)
Nondeductible stock-based compensation		1,471.0			1,867.9			3,106.3			49.9
Income exempt from taxes		(593.5	)		(450.9	)		(1,026.6	)		(16.5	)
Effect of change in statutory tax rate		0			(606.6	)		0			0
Other, net		(117.5	)		127.6			141.6			2.3


Income tax expense	Rs.	29,840.1		Rs.	42,304.2		Rs.	54,519.9		US$	875.0

The tax effects of significant temporary differences are as follows:


	As of March 31,
	2014		2015		2015
	(In millions)
Tax effect of:
Deductible temporary differences:
Allowance for loan losses	Rs.	11,221.9	Rs.	12,576.7	US$	201.8
Unrealized loss on securities available for sale		6,274.7		0		0
Investments, others		441.9		4.6		0.1
Derivatives		489.7		820.9		13.2
Employee benefits		2,048.5		1,225.8		19.7
Others		2,935.0		3,212.8		51.5


Deferred tax asset		23,411.7		17,840.8		286.3


Taxable temporary differences:
Property and equipment		783.6		891.3		14.3
Loan origination cost		1,577.2		1,944.9		31.2
Unrealized gain on securities available for sale		0		5,209.8		83.6
Intangible assets		78.5		4.1		0.1


Deferred tax liability		2,439.3		8,050.1		129.2


Net deferred tax asset (liability)	Rs.	20,972.4	Rs.	9,790.7	US$	157.1

Management believes that the realization of the recognized deferred tax assets is more likely than not based on expectations as to future pretax income. The total unrecognized tax benefit as on March 31, 2014 and March 31, 2015 is Rs. 648.3 million and Rs. 648.3 million, respectively. The Bank recognised interest income but no interest expense or penalty for the years ended March 31, 2013, March 31, 2014 and March 31, 2015. The major income tax jurisdiction for the Bank is India. The open tax years (first assessment by the tax authorities) is pending from fiscal 2013 onwards. However, appeals filed by the Bank are pending with various local tax authorities in India for earlier tax years.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

Year ended March 31,

2014

2015

(In millions)

Opening balance

Rs.

648.3

Rs.

648.3

US$

10.4

Increase/(decrease) related to prior year tax positions

Closing balance

Rs.

648.3

Rs.

648.3

US$

10.4

The Bank’s total unrecognized tax benefits, if recognized, would reduce the income tax expense provisions by Rs. 648.3 million as of March 31, 2015 and thereby would affect the Bank’s effective tax rate.

Significant changes in the amount of unrecognized tax benefits within the next 12 months cannot be reasonably estimated as the changes would depend upon the progress of tax examinations with various tax authorities.

The Bank’s policy is to include interest and penalties related to gross unrecognized tax benefits within income taxes