Non-life insurance companies can heave a sigh of relief with the government roling back their decision to tax unrealised gains on their investment.

“The appreciation in the value of investments, being in the nature of unreal-ized gain is not taken into account for determining profit or loss of non-life insurance business as per the IRDA regulations. It is, therefore, proposed that the unrealized gains due to appreciation in the value of investments will not be included in the total income” according to a the budget documents.

This amendment is proposed to take effect from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years

“General Insurance Council had made a representation that unrealised gains should not be taxed and the budget has withdrawn this tax” said SL Mohan, chief executive General Inusrance Council.

However, the budget has also said that since income from unrealized gains is not being reckoned for purpose of taxation, companies cannot claim tax breaks for provision toward depreciation in market value of securities unless they sell the instruments at a loss.

“Similarly, deduction will not be allowed for provision for losses due to diminution in the value of investments as this is not a realized loss. It has also been provided that any gain or loss on realisation of investments shall be added or deducted for the purpose of computation of the total income, if the same is not already credited or debited in the profit and loss account” the budget documents said.
Source - ECONOMICTIMES.COM

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