2. Presented By : Sana Riaz (0185) Saira Khalid (0201)

4. A business that provides coverage, in the form of compensation resulting from loss, damages, injury, treatment or hardship in exchange for premium payments. The company calculates the risk of occurrence then determines the cost to replace (pay for) the loss to determine the premium amount.

5.  Insured: The insured, is the person in whose favor, the contract is made and who is indemnified upon the happening of a specified contingency or event.  Insurer: Insurer or the insurance company agrees to pay for the future financial losses of the insured against a regular payment of premium.

6. CONTRACT OF INDEMNITY: Except the life insurance contract,all other types of insurance contracts are contracts of indemnity.These contracts are fire insurance, marine insurance, theft insurance, etc. LIFE INSURANCE CONTRACT: This contract is not a contract of indemnity.Value of life of any human being cannot be estimated hence it is very difficult to calculate the exact amount of loss. Under such contracts insured pays a fixed premium every year and either at the expiry of policy or on his death.

7. Section 99 and Fourth Schedule of the Income Tax Ordinance,2001 specify special provisions relating to the taxation of insurance business. The Fourth Schedule (see section 99) RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF INSURANCE BUSINESS

8. The profits and gains of a taxpayer carrying on life insurance business shall, from whatever source derived, be chargeable under the head "Income from business or profession" and shall be computed separately from his income from any other business.

9. The profits and gains of a life insurance business shall be the current year’s surplus appropriated to profit and loss account prepared under the Insurance Ordinance, 2000, as per advice of the Appointed Actuary, net of adjustments under section 22(8), 23(8) and 23(11) so as to exclude from it any expenditure other than mentioned under the provision of section 29, allowed as a deduction in computing profits and gains of a business.

10. Following are the provisions: 1) The amounts paid to, or reserved for, or expended on behalf of, policy-holders shall be allowed as a deduction: 2) a) Any amount either written off or reserved in the accounts or through the actuarial valuation balance sheet to meet depreciation, or loss on the realisation, of investments, shall be allowed as a deduction b) Any sums taken credit for in the accounts or actuarial valuation balance sheet on account of appreciation, or gains on the realisation of investments shall be included in the surplus:

11. 3) Interest received in respect of any securities of the Government which have been issued with the condition that interest thereon shall not be liable to tax shall be excluded.

12. If any amount reserved for policy-holders ceases to be so reserved, and is not paid to, or expended on behalf of policy-holders, the sums previously allowed as a deduction under this Ordinance or the repealed Ordinance shall be treated as part of the respective statutory fund for the tax year in which the amount ceased to be so reserved.

13. If it appears to the Commissioner, after consultation with the Securities and Exchange Commission of Pakistan, that the rate of profit on debt or other factors employed in determining the liability in respect of outstanding policies is inconsistent with the valuation of investments so as artificially to reduce the surplus, the Commissioner may make such adjustment as he thinks reasonable.