Section 44 of ITA, 1961 : Section 44: Insurance Business

Explanation using Example

Imagine a mutual insurance company, XYZ Mutual Ltd., which operates in the business of providing insurance policies to the public. According to the Income-tax Act, 1961, Section 44, the company's profits and gains from its insurance business will not be calculated based on the usual provisions for computing income such as 'Interest on securities', 'Income from house property', 'Capital gains', or 'Income from other sources'. Instead, XYZ Mutual Ltd. must compute its taxable income in accordance with the specific rules laid out in the First Schedule of the Income-tax Act. This means that even if the company earns interest on securities or has income from property, these amounts will be accounted for in a unique way as prescribed by the First Schedule when it comes to their insurance business profits.