Question

How are additional reserves or catastrophic reserves typically treated in the computation of profits?

a.

They are included as a deduction before assessment of tax

b.

They are included as a deduction after assessment of tax

c.

They are not allowed as a deduction before assessment of tax

d.

They are not allowed as a deduction after assessment of tax

Posted under IC85 Reinsurance Management

Answer: (c).They are not allowed as a deduction before assessment of tax Explanation:In most countries, including India, additional reserves or catastrophic reserves are not allowed as a deduction before the assessment of tax. The normal format of profit computation as laid down by legislation does not provide for such reserves, and income tax authorities do not permit their deduction. Therefore, if an insurer or reinsurer wishes to set up an additional catastrophic reserve, it must be done out of profit after tax.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. How are additional reserves or catastrophic reserves typically treated in the computation of profits?
Add Comment

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What is the maximum percentage allowed for reserves for unexpired risks in the computation of profits in general insurance companies in India?

View solution

Q. In which of the following reinsurance commission methods will the commission payable be determined by applying the agreed percentage of commission to the premiums ceded less returns and cancellation?

View solution

Q. Which of the following is an example of a taxation aspect in reinsurance?

View solution

Q. What is the objective of a reinsurer over a period of years?

View solution

Q. How does a reinsurer transfer their tax burden to the ceding insurer?

View solution

Q. Which type of taxation is suggested as a possible solution for budget problems?

View solution

Q. What makes determining the profit of a reinsurer difficult?

View solution

Q. What does the insurer-reinsurer relationship aim to do?

View solution

Q. Which types of companies give rise to extreme fluctuations in reinsurance?

View solution

Q. What event impaired the capital of many insurers and reinsurers and resulted in insolvencies?

View solution

Q. What is the ideal approach to taxing a reinsurer's profit?

View solution

Q. How does the practice of deducting tax at source as a percentage of the reinsurance premium impact the administration costs of the insurer?

View solution

Q. What is the purpose of indicating a net premium to the ceding insurer (reinsured)?

View solution

Q. How can a reinsurer optimize their results and pay taxes regularly?

View solution

Q. What is the tax known as when it is levied on direct or reinsurance premium?

View solution

Q. In which country is a Service Tax of 5% levied on direct premium?

View solution

Q. Where is a reinsurer liable to income tax on profit based on their worldwide business?

View solution

Q. How is interest on premium reserve released treated for tax purposes?

View solution

Q. How do some insurers reduce administrative work related to reserves and interest?

View solution

Q. What is the percentage of service tax that is levied on direct premium in India?

View solution
View All MCQs on IC85 Reinsurance Management

Recommended Subjects

Are you eager to expand your knowledge beyond IC85 Reinsurance Management? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!

Tissue Engineering

Delve into the cutting-edge field of Tissue Engineering with our specialized...

Geotechnical Engineering

Dive into the world of Geotechnical Engineering with our dedicated category. Explore...

Logical Reasoning

Enhance your logical thinking and decision-making abilities with our Logical...

Total Quality Management

Enhance your understanding of quality management with our Total Quality Management...

Molecular Biology

Dive into the intricate world of molecular biology with our specialized category....

Data Interpretation

Master the art of data analysis and interpretation with our Data Interpretation...

DC Machines

Dive into the fundamentals of direct current (DC) machines with our specialized...

Environment Management

Master the art of Environment Management with our specialized category. Explore...

Power Plant Engineering

Embark on a journey through the fascinating domain of Power Plant Engineering, where...