Amended and updated notes on section 115B of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to tax on profits and gains of life insurance business.
Chapter XII (Sections 110 to 115BBG) of the Income Tax Act 1961 deals with the provisions related to determination of tax in certain special cases. Section 115B of IT Act 1961-2020 provides for tax on profits and gains of life insurance business.
Recently, we have discussed in detail section 115AD (Tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer) of IT Act 1961. Today, we learn the provisions of section 115B of Income-tax Act 1961. The amended provision of section 115B is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 115B of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-115B: Tax on profits and gains of life insurance business
Section 115B(1) of Income Tax Act
Where the total income of an assessee includes any profits and gains from life insurance business, the income-tax payable shall be the aggregate of—
- (i) the amount of income-tax calculated on the amount of profits and gains of the life insurance business included in the total income, at the rate of twelve and one-half per cent; and
- (ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of profits and gains of the life insurance business.
Section 115B(2) of Income Tax Act
Notwithstanding anything contained in sub-section (1) or in any other law for the time being in force or any instrument having the force of law, the assessee shall, in addition to the payment of income-tax computed under sub-section (1), deposit, during the previous years relevant to the assessment years commencing on the 1st day of April, 1989 and the 1st day of April, 1990, an amount equal to thirty-three and one-third per cent of the amount of income-tax computed under clause (i) of sub-section (1), in such social security fund (hereafter in this sub-section referred to as the security fund), as the Central Government may, by notification in the Official Gazette, specify in this behalf :
Provided that where the assessee makes during the said previous years any deposit of an amount of not less than two and one-half per cent of the profits and gains of the life insurance business in the security fund, the amount of income-tax payable by the assessee under the said clause (i) shall be reduced by an amount equal to two and one-half per cent of such profits and gains and, accordingly, the deposit of thirty-three and one-third per cent required to be made under this sub-section shall be calculated on the income-tax as so reduced.