THE FIRST SCHEDULE
INSURANCE BUSINESS
[See section 44]
A.—Life
insurance business
Profits of
life insurance business to be computed separately.
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.
37[R1] [Computation 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 business.
5. The
profits and gains of any business of insurance other than life insurance shall
be taken to be the 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 38[R2] [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 39[R3] [43B]
in computing the profits and gains of a business shall be added back;
41[R5] (c) such amount carried over to a reserve for
unexpired risks as may be prescribed in this behalf shall be allowed as a
deduction.
C.—Other
provisions
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 premium income.
(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.
7. (1) For
the purposes of these rules—
(ii) “investments”
includes securities, stocks and shares;
(iv) “life insurance
business”44[R8]
means 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 Schedule.
(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 4345[R9] of the Life Insurance Corporation Act, 1956
(31 of 1956).
[R1]Substituted by the Finance Act, 1976, w.e.f. 1-4-1977
[R2]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f. 1-4-1989
[R3]Substituted for “43A” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Earlier, “43A” was substituted for “43” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967
[R4]Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to its omission, clause (b) stood as under :
“(b) any amount either written off or reserved in the accounts to meet depreciation of or loss on the realisation of investments shall be allowed as a deduction, and any sums taken credit for in the accounts on account of appreciation of or gains on the realisation of investments shall be treated as part of the profits and gains :
Provided that the Assessing Officer is satisfied about the reasonableness of the amount written off or reserved in the accounts, as the case may be, to meet depreciation of or loss on the realisation of investment;”
[R5]See rule 6E for limits prescribed for amount that can be carried over to a “reserve for unexpired risk”: (50 per cent of net premium in case of fire or miscellaneous insurance business ; 100 per cent of net premium in case of marine insurance business and 100 per cent of net premium where insurance business relates to fire insurance or engineering insurance and which provides insurance for terrorism risks).
[R6]Omitted by the Finance Act, 1976, w.e.f. 1-4-1977. Earlier clause (i) was amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R7]Omitted by the Finance Act, 1976, w.e.f. 1-4-1977.
[R8]Clause (11) of section 2 of the Insurance Act, 1938
defines “life insurance business” as follows :
‘(11) “life
insurance business” means the business of effecting contracts of insurance upon
human life, including any contract whereby the payment of money is assured on
death (except death by accident only) or the happening of any contingency
dependent on human life, and any contract which is subject to payment of
premiums for a term dependent on human life and shall be deemed to include—
(a) the granting of disability and double or triple indemnity
accident benefits, if so provided in the contract of insurance,
(b) the granting of annuities upon human life, and
(c) the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependants of such person;’
[R9]For text of section 43 of the Life Insurance Corporation Act, 1956, see Appendix One