Insurance business
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Irrespective of anything to the contrary contained in the provisions of this Act for computing income under the head “Income from house property”, “Capital gains” or “Income from other sources”, or in section 390(5) and (6), or in sections 26 to 54, the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed as per the provisions of Schedule XIV.
FAQs on Section 55 of Income Tax Act 2025
Q1. What does Section 55 of the Income Tax Act, 2025 deal with?
Section 55 deals with the computation of income from the business of insurance. It mandates that such income shall be computed in accordance with the provisions of Schedule XIV.
Q2. From when is Section 55 effective?
Section 55 is effective from 1st April, 2026.
Q3. Does Section 55 apply to mutual insurance companies and co-operative societies?
Yes, the provisions of Section 55 apply to all insurance businesses, including those carried on by mutual insurance companies and co-operative societies.
Q4. Which heads of income are overridden by Section 55 for insurance businesses?
Section 55 overrides provisions related to the heads “Income from house property”, “Capital gains”, “Income from other sources”, and also the provisions of Sections 26 to 54 and 390(5) and (6).
Q5. What is the significance of Schedule XIV under Section 55?
Schedule XIV provides the specific method for computing the profits and gains of insurance businesses. It serves as a special provision, taking precedence over the general computation methods in the Act.
Q6. If an insurance company has income from capital gains, how is it treated under Section 55?
Even if an insurance company has income which would otherwise fall under “Capital gains”, such income shall be computed in accordance with Schedule XIV and not under the regular provisions for capital gains.
Q7. Does Section 55 apply to both life and general insurance businesses?
Yes, Section 55 applies broadly to all types of insurance businesses, including life insurance, general insurance, and health insurance.
Q8. Are the provisions of Section 55 mandatory for insurance companies?
Yes, the provisions are mandatory and override other provisions of the Act for computing profits and gains of insurance businesses.
Q9. Can an insurance company opt out of Schedule XIV and follow general provisions?
No, there is no option to opt out. The computation must be strictly as per Schedule XIV.
Q10. Is income from investments by insurance companies also computed under Schedule XIV?
Yes, all components of the insurance business, including investment income, are governed by the computation method in Schedule XIV.
Q11. How are deductions and allowances treated under Section 55?
Deductions and allowances for insurance businesses are determined as per the rules laid out in Schedule XIV, not under the general provisions of the Act.
Q12. Are there any exceptions provided under Section 55 for small insurance companies?
No, Section 55 applies uniformly to all insurance businesses, regardless of their size.
Q13. Does Schedule XIV provide for any special adjustments or provisions unique to insurance businesses?
Yes, Schedule XIV is designed to accommodate the specific nature of insurance operations, including actuarial valuations, policy liabilities, and reserves.
Q14. Are insurance companies required to maintain separate books for computation under Schedule XIV?
While the Act does not explicitly mandate separate books, insurance companies must ensure accurate computation as per the norms specified in Schedule XIV, which may necessitate maintaining specific records.
Q15. What happens if there is a conflict between Schedule XIV and another provision of the Act?
In case of any conflict, Schedule XIV shall prevail as per the overriding clause in Section 55.
Section 55 of the Income Tax Act, 2025, establishes a special framework for computing income from insurance businesses, effective from 1st April, 2026. By mandating computation as per Schedule XIV, it overrides various other provisions of the Act to ensure that the unique nature of insurance operations is accurately reflected in taxable income. This section applies uniformly to all forms of insurance entities, including mutual and co-operative insurers, thereby promoting consistency and clarity in tax treatment across the insurance sector.
