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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part III)

Aarogya Life Ltd's valuation shows a surplus of Rs 50 crore. During the period since the last valuation, income-tax of Rs 6 crore was actually deducted at source on its income, and the estimated income-tax on the surplus is Rs 4 crore. Under section 49(2), what is the surplus after the permitted addition and deduction, and where must these be shown?

The surplus becomes Rs 52 crore: Rs 50 crore plus Rs 6 crore of tax actually deducted at source, minus Rs 4 crore estimated tax on the surplus. Section 49(2) requires the addition and deduction to be shown in an abstract of the actuary's report under section 13(1).

  1. ARs 52 crore, shown in the abstract of the actuary's reportCorrect
  2. BRs 48 crore, shown in the abstract of the actuary's report
  3. CRs 60 crore, shown only in the profit and loss account
  4. DRs 56 crore, shown in the abstract of the actuary's report

Explanation

Section 49(2) lets the actual tax deducted at source (Rs 6 crore) be added to the surplus after deducting estimated income-tax on the surplus (Rs 4 crore). Net addition is Rs 2 crore, so 50 + 6 - 4 = Rs 52 crore. The addition and deduction must be shown in an abstract of the actuary's report referred to in section 13(1).

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