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CMA Final · Direct Tax Laws and International Taxation · Business Restructuring

A non-resident insurer with branches in India has global income of Rs 480 crore. Its total premium income is Rs 3,000 crore, of which Rs 250 crore is derived from India. In the absence of more reliable data, what profit may be deemed to arise in India under Schedule XIV of the Income-tax Act, 2025, and how are the premium figures used?

The deemed profit is Rs 40 crore. Global income of Rs 480 crore is apportioned in the ratio of India premium income, Rs 250 crore, to total premium income, Rs 3,000 crore, which is one-twelfth. This applies only in the absence of more reliable data.

  1. ARs 40 crore, being global income multiplied by India premium over total premiumCorrect
  2. BRs 48 crore, being 10% of global income
  3. CRs 250 crore, being the India premium
  4. DRs 80 crore, being global income multiplied by total premium over India premium

Explanation

Deemed Indian profit is the proportion of global income matching India premium to total premium: 480 x 250/3,000 = 40 crore. The inverted ratio gives 480 x 12 = 5,760, which is unreasonable, and Rs 80 crore comes from using the wrong fraction (1/6 instead of 1/12). Check: 40/480 = 1/12 = 250/3,000.

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