Skip to content

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

Meridian Life's last valuation was at 31 March 2025 and the next is at 31 March 2026. During the intervening period, income-tax deducted at source on its income amounted to Rs 12 crore, and the estimated income-tax on the surplus is Rs 9 crore. The valuation surplus before this adjustment is Rs 60 crore. Applying Section 49(2), what surplus is available for Section 49(1) purposes, and where is the adjustment shown?

The available surplus is Rs 63 crore. Section 49(2) allows the TDS of Rs 12 crore to be added after deducting the estimated tax of Rs 9 crore on the surplus, so 60 plus 12 minus 9 equals 63. The adjustment is shown in an abstract of the actuary's report under section 13(1).

  1. ARs 63 crore, shown in an abstract of the actuary's report referred to in section 13(1)Correct
  2. BRs 69 crore, shown in the insurer's profit and loss account
  3. CRs 51 crore, shown in an abstract of the actuary's report referred to in section 13(1)
  4. DRs 72 crore, shown in the insurer's profit and loss account

Explanation

Section 49(2) lets the actual TDS for the period be added to the surplus after deducting an estimated income-tax on that surplus: 60 + 12 - 9 = Rs 63 crore. The addition and deduction are shown in an abstract of the actuary's report referred to in sub-section (1) of section 13. Adding without deducting gives Rs 72 crore, which is wrong, and subtracting the TDS gives Rs 51 crore.

Did you get it right without looking?

One question tells you little. A timed set on Functions in Insurance and Compliance related thereto (Part III) shows your real accuracy, how long you take and where you lose marks.

Practise Functions in Insurance and Compliance related thereto (Part III)Free diagnostic mock

More Functions in Insurance and Compliance related thereto (Part III) questions