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

Under Schedule XIV of the Income-tax Act, 2025, how are the profits and gains of life insurance business computed?

Life insurance profits are the annual average of the surplus found in the actuarial valuation for the last inter-valuation period before the tax year, adjusted to remove earlier periods' surplus or deficit, with inadmissible expenditure added back. The profit-and-loss-account method applies only to other insurers.

  1. AProfit before tax as shown in the profit and loss account, with add-backs
  2. BThe annual average of the surplus from the actuarial valuation for the last inter-valuation period ending before the tax year commenced, adjusted to exclude surplus or deficit of earlier periods, with inadmissible expenditure addedCorrect
  3. CPremium income less claims paid in the tax year
  4. DA fixed percentage of the premium income from India

Explanation

Paragraph 2 takes the annual average of the surplus disclosed by the actuarial valuation for the last inter-valuation period, after excluding earlier periods' surplus or deficit, and adds inadmissible expenditure. Option A describes the method for other insurance business.

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