THE FOURTH SCHEDULE

THE FOURTH SCHEDULE
COMPUTATION OF THE PROFITS AND GAINS OF INSURANCE
BUSINESS
[See section 28(2)(a)]

1. Profits  of  life  insurance  to  be  computed  separately.- 

In  the  case  of  any person  who  carries  on,  or  at  any  time  in  the  income  year  carried  on,  life insurance  business,  the  profits  and  gains  of  such  person  from  th at  business shall be computed separately from his income, profits or gains from any other business.

2. Computation of profits and gains of life insurance business.- 

The profits and gains of life insurance business, other than pension and annuity business, shall be taken to be either-

(a) the gross external incomings of the income year from that business less the management expenses of that year, or

(b)  the  annual  average  of  the  surplus  arrived  at  by  adjusting  the  surplus  or deficit  disclosed  by  the  actuarial  valuation  made  for  the  last  inter-valuation period ending before the year for which the assessment is to be made, so as to exclude from it any surplus or deficit included therein which was made in any earlier  inter-valuation  period  and  any  expenditure  other  than  expenditure which may, under the provisions of section 29 of this Ordinance, be allowed for, in computing the profits and gains of a business, whichever is the greater:
Provided  that  the  amount  to  be  allowed  as  management  expenses  shall  not
exceed-

(a) 7 1/2  per cent. of the premiums received during the income year in respect of single premium life insurance policies, plus

(b)  in  respect  of  the  first  year's  premiums  received  in  respect  of  other  life insurance policies for which the number of annual premiums payable is less than twelve, or for the number of years during which premiums are payable is less than twelve, for each such premium or each such year, 7 1/2  per cent. of such first year's premium or premium received during the income year, plus

(c) 90 per cent of the ¹[first year's premium received during the] income year in respect of all other life insurance policies, plus
(d) 12 per cent. of all renewal premiums received during the income year.

3.   Computation of profits and gains of pension and annuity business.- 

The profits  and  gains  of  pension  and  annuity  business  shall  be  taken  to  be  the annual average of the surplus computed in the manner laid in paragraph 2(b).
 

4. Deductions.-

In computing the surplus,-

(a)  under  paragraph  2(b),  for  the  purpose  of  life  insurance  business,  three fourths  of  the  amounts  paid  to  or  reserved  for  or  expended  on  behalf  of policy-holders, shall be allowed as a deduction, and under paragraph  3, the amounts paid to or reserved for or expended on behalf of the members of an approved superannuation fund shall be allowed as a deduction :

Provided that in the first such computation made under this paragraph of any such surplus, no account shall be  taken of any such amounts to the extent to which they are paid out of or in respect of any surplus brought forward from a previous inter-valuation period :

Provided  further  that  if  any  amount  so  reserved  for  policy-holders  or members of an approved superannuation fund, as the case may be, ceases to be so reserved, and is not paid to or expended on behalf of policy-holders or members of an approved superannuation fund, as the case may be, one-half or three-fourths of such amount or the entire amount, as the case may be, if it has been previously allowed as a deduction, shall be treated as part of the surplus for the period in which the said amount ceased to be so reserved;

(b) any amount either written off or reserved in the accounts or through the actuarial  valuation  balance-sheet  to  meet  depreciation  of  or  loss  on  the realisation of securities or other assets, shall be allowed as a deduction and any sums taken credit for in the accounts or actuarial valuation balance-sheet on account of appreciation of or gains on the realisation of the securities or other assets shall be included in the surplus :

Provided  that if, upon investigation, it appears to the Deputy Commissioner of Taxes after consultation with the Controller of Insurance that having due regard  to  the  necessity  for  making  reasonable  provision  for  bonuses  to participating  policy-holders  and  for  contingencies,  the  rate  of  interest  or other factor employed in determining the liability in respect of outstanding policy is materially inconsistent with the valuation of the securities and other assets so as artificially to reduce the surplus, such adjustment shall be made
to the allowance for depreciation of or to the amount to be included in the surplus in respect of appreciation of, such securities and other assets as shall increase the surplus for the purposes of these paragraphs to a figure which is fair and just;

²[(c) interest received in respect of any securities of the Government which have been issued with the condition that interest thereon shall not be liable to tax shall be excluded.]

5.   Adjustment  of  tax  paid by  deduction  at  source.-

Where  for  any  year  an assessment  of  the  profits  and  gains  of  life  insurance  business  is  made  in accordance with the annual average of a surplus disclosed by a valuation for an  inter-valuation  period  exceeding  twelve  months,  then,  in  computing  the tax payable for that  year, credit shall not be given in accordance with section 62 for the tax paid in the income year, but credit shall be given for the annual average of the tax paid by deduction at source from interest on securities or otherwise during such period.

6.   Computation of profits and gains of other insurance business.-

³[(1) The profits and gains of any business of insurance other than life insurance shall be  taken  to  be  the  balance  of  the  profits  disclosed  by  the  annual  accounts, which are required to be prepared complying the provisions of the ⁴[বীমা আইন, ২০১০ (২০১০সনের ১৩ নং আইন) (Insurance Act, 2010) (Act No. 13 of 2010)], after adjusting  such  balance so as  to  exclude  from  it  any  expenditure, other than expenditure which may under the provisions of section 29 of the Income tax Ordinance,  1984  be  allowed  for,  in  computing  the  profits  and  gains  of  a business. Profits and losses on the realisation of investments, and depreciation
and appreciation of the value of investments shall be dealt with as provided in paragraph 4 for the business of life insurance.]

(2) Where a company sets aside a portion of its income, profits and gains to meet exceptional losses, so much of such portion as does not exceed ten percent  of  the  premium  income  of  the  year  in  which  it  is  set  aside  shall  be deducted from the balance of the profits referred to in sub-paragraph (1).

(3) The amount deducted under sub-paragraph (2) in any year, together with the amounts, if any, deducted or carried to a reserve in earlier years to meet exceptional  losses  (as  reduced  by  the  amounts,  if  any,  paid  out  of  such amounts or reserve to meet exceptional losses) shall not exceed the premium income  of  that  year  or  the  average  premium  income  of  the  three  years immediately preceding that year, whichever is the higher.

(4)  Notwithstanding  anything  to  the  contrary  contained  in  this  Ordinance, where  any  amount  is  paid,  appropriated  or  diverted  out  of,  or  from  the amounts  deducted  under  sub-paragraph  (2)  for  purposes  other  than  the meeting  of  an  exceptional  loss,  such  amount  shall,  together  with  the  other premium income, if any, of the company for the year in which such payment, appropriation or diversion takes place, be deemed to be the premium income of  the  company  for  that  year;  and  in  the  event  of  the  liquidation  of  the company  or  the  discontinuance  of  the  business  to  which  this  paragraph applies, whichever is the earlier, the aggregate of the amounts deducted under
sub-paragraph (2) (as reduced by the payments made out of such amounts to meet exceptional losses) shall, together with the other income, if any, of the company  for  the  year  in  which  it  goes  into  liquidation  or  in  which  such business is discontinued, be deemed to be the income of the company for that year.

Explanation.-For the purposes of this paragraph, "exceptional loss" means the amount by which the aggregate loss in any year exceeds fifty per cent. of the premium income of that year or fifty per cent. of the average premium income of the three years immediately preceding that year, whichever is the higher, total world income of the company corresponding to the proportion which its premium income derived from Bangladesh bears to its total premium income.For the purposes of this paragraph, the total world income of life insurance companies  not  resident  in  Bangladesh  whose  profits  are  periodically ascertained by actuarial valuation, shall be computed in the manner laid down in  these  paragraphs  for  the  computation  of  the  profits  and  gains  of  life insurance business carried on in Bangladesh.

7.   Profits  and  gains  of  non-resident  person.- 

The  profits  and  gains  of  the branches in Bangladesh of an insurance company not resident in Bangladesh in the absence of more reliable data, may be deemed to be the proportion of the total world income of the company corresponding to the proporti on which its  premium  income  derived  from  Bangladesh  bears  to  its  total  premium income.  For  the  purpose  of  the  paragraph,  the  total  world  income  of  life insurance companies not resident in Bangladesh whose profits are periodically ascertained by actual valuation shall be computed in the manner laid down in these  paragraphs  for  the  computation  of  the  profits  and  gains  of  the  life
insurance business carried on in Bangladesh.

8.   Mutual  Insurance  Associations.- 

These  paragraph  apply  to  the  assessment of the profits of any business of insurance carried on by a mutual insurance association.

9. Definition.- For the purposes of this Schedule.-

(a)  "gross  external  incomings"  means  the  full  amount  and  incomings  from interest, dividends, fines and fees and all other incomings from whatever source derived (except premium received from policy-holders and interest and  dividends  on  any  annuity  fund)  and  includes  also  profits  from
reversions  and  on  the  sale  or  the  granting  of  annuities,  but  excludes profits on the realisation of securities or other assets :

Provided that incomings, including the annual value of the property occupied by the assessee, which but for the provisions of sub-section

(2) of section 28 would  have  been  assessable  under  section  24,  shall  be  computed  upon  the basis  laid  down  in  the  last  named  section,  and  that  there  shall  be  allowed from  such  gross  incomings  such  deductions  as  are  permissible  under  that section;

(b)  "management  expenses"  means  the  full  amount  of  expenses  (including commissions) incurred exclusively in the management of the business of life insurance, and in the case of a company carrying on other classes of business as well as the business of life insurance in addition thereto, a fair proportion of  the  expenses  incurred in  the  general  management  of  the  whole  business. Bonuses  or  other  sums  paid  to  or  reserved  on  behalf  of  policy-holders,depreciation of, and losses on the realisation of securities or other assets and any  expenditure  other  than  expenditure  which  may  under  the  provisions  of section 29 be allowed in computing the profits and gains of a business are not
management expenses for the purposes of this Schedule;
(c)  "life  insurance  business"  means  life  insurance  business  as  defined  in section ⁵[5(2) of  বীমা আইন, ২০১০ (২০১০সনের ১৩ নং আইন)];
(d) "securities" includes stocks and shares;
(e) "pension and annuity business" means any life insurance business relating to  a  contract  with  the  trustees  of  an  approved  superannuation  fund,  where such contract is-

(i) entered into only for the purposes of such fund, and
(ii) so framed that the liabilities undertaken thereunder by the person carrying  on  the  insurance  business  correspond  with  the  liabilities against which the contract is intended to secure such fund.

........................................................................................

¹Subs. for. "first" by Corrigendum issued vide Bangladesh Gazette, dated 19th August, 1984

²Subs. by F.A. 1995

³Subs. by F.A. 2005
⁴Subs. for "insurance Act, 1938 (IV of 1938)" by F.A. 2012

 ⁵Subs. for "2(II) of the Insurance Act, 1938 (IV of 1938)" by F.A. 2012

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