Profits of life insurance business to be computed
1. In the case of a person who carries on or at any
time in the previous year carried on life insurance business, the profits and
gains of such person from that business shall be computed separately from his
profits and gains from any other business.
of profits of life insurance business.
2. The profits and gains of life insurance business
shall be taken to be the annual average of the surplus arrived at by adjusting
the surplus or deficit disclosed by the actuarial valuation made in accordance
with the Insurance Act, 1938 (4 of 1938), in respect of the last
inter-valuation period ending before the commencement of the assessment year,
so as to exclude from it any surplus or deficit included therein which was made
in any earlier inter-valuation period.]
3. [Omitted by the Finance Act, 1976, w.e.f.
1-4-1977. Earlier, the rule was first amended by the Finance Act, 1966, w.e.f.
1-4-1966 and by the Finance Act, 1965, w.e.f. 1-4-1965.]
Adjustment of tax paid by deduction at source.
4. Where for any year an assessment of the profits
of life insurance business is made in accordance with the annual average of a
surplus disclosed by a valuation for an inter-valuation period exceeding twelve
months, then, in computing the income-tax payable for that year, credit shall
not be given in accordance with section 199 for
the income-tax paid in the previous year, but credit shall be given for the
annual average of the income-tax paid by deduction at source from interest on
securities or otherwise during such period.
B.—Other insurance business
Computation of profits and gains of other insurance
5. The profits and gains of any business of
insurance other than life insurance shall be taken to be the 65[balance of
the profits disclosed by the annual accounts, copies of which are required
under the Insurance Act, 1938 (4 of 1938), to be furnished to the Controller of
Insurance,] subject to the following adjustments:—
(a)subject to the other provisions of this rule,
any expenditure or allowance 66[including
any amount debited to the profit and loss account either by way of a provision
for any tax, dividend, reserve or any other provision as may be prescribed]
which is not admissible under the provisions of sections
30 to 67[43B] in computing the profits and gains of a business
shall be added back;
The following clause (b)
shall be substituted for existing clause (b) by the Finance Act, 2010, w.e.f.
68a[(b)(i) any gain or loss on realisation of
investments shall be added or deducted, as the case may be, if such gain or
loss is not credited or debited to the profit and loss account;
provision for diminution in the value of investment debited to the profit and
loss account, shall be added back;]
69(c)such amount carried over to a reserve for
unexpired risks as may be prescribed in this behalf shall be allowed as a
Profits and gains of non-resident person.
6. (1) The profits and gains of the branches in
India of a person not resident in India and carrying on any business of
insurance, may, in the absence of more reliable data, be deemed to be that
proportion of the world income of such person which corresponds to the
proportion which his premium income derived from India bears to his total
(2) For the purposes of this rule, the world income in
relation to life insurance business of a person not resident in India
shall be computed in the manner laid down in this Act for the computation of
the profits and gains of life insurance business carried on in India.
(iv)“life insurance business”72means life
insurance business as defined in clause (11) of section 2 of the
Insurance Act, 1938 (4 of 1938) ;
(v)“rule” means a rule contained in this
(2) References in these rules to the Insurance Act,
1938 (4 of 1938), or any provision thereof, shall, in relation to the Life
Insurance Corporation of India, be construed as references to that Act or
provision as read with section 4373 of the
Life Insurance Corporation Act, 1956 (31 of 1956).