All non-life insurers and reinsurer

Sub: Profit on sale/redemption of investments – Income tax thereon

As part of the pre budget exercise, non-life insurers had represented to the Authority that capital gains on investments were considered as part of income of general insurance companies, and were subject to corporate tax rate. As against this, in case of other companies, where long term capital gains are routed through the stock exchange, no / nominal tax is levied.

The Authority had taken up the non life insurers’ case of corporate tax rate being charged on profit on sale/ redemption of investments with the Ministry of Finance. We have now received letter No. F. No.153/24/2006-TPL dated 21 st February, 2006 clarifying that “the exemption available to any other assessee under any clause of section 10 of the Income -tax Act, 1961 [including clause (38) of section 10 regarding long-term capital gains] is also available to a person carrying on non-life insurance business subject to fulfillment of the conditions, if any, under a particular clause of section 10 under which exemption is sought. General insurance companies are, therefore, on par with other assessees who are entitled to or are eligible for exemption under section 10 of the Income-tax Act of long-term capital gains”.

Copy of the communication received from CBDT, Department of Revenue, Ministry of Finance, is enclosed for reference.

(C. R. Muralidharan)

 

     

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