CS Professional · Banking and Insurance - Laws and Practice · Life Insurance
LIC earns a profit from a business other than life insurance in a financial year. After making provision for reserves and other necessary matters, how does Section 28A of the LIC Act, 1956 (as it now reads) direct the balance to be treated?
The balance is allocated to or reserved for the members, after provision for reserves and other necessary matters. Section 28A was amended in 2021 to replace the earlier requirement of payment to the Central Government.
- APaid to the Central Government
- BAllocated to or reserved for the membersCorrect
- CDistributed wholly to life policyholders
- DTransferred to the IRDAI
Explanation
Section 28A, as substituted in 2021, says the balance of profits from non-life-insurance business is allocated to or reserved for the members. The earlier wording 'paid to the Central Government' was replaced, so that option is wrong.
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