Question

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

a.

Subject to deduction of income tax at source

b.

Exempt from income tax

c.

Waived under reciprocal arrangements

d.

Taxed at a lower rate than other income sources

Posted under IC85 Reinsurance Management

Answer: (a).Subject to deduction of income tax at source Explanation:Interest on premium reserve released is subject to deduction of income tax at source. When the interest is paid or released, the applicable tax amount is deducted before the remaining amount is made available to the reinsurer.

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