Page 192 - RISK Management IC 86
P. 192
Risk Management
Q8. Write a critical note on external financial
influences on risk financing.
Ans. There are several external financial influences on
risk financing :
i) Taxation - Companies in India are taxed on their
profits. The amount of taxable profit is determined
according to Income-tax Rules, which specify the
treatment of various items of income and
expenditure, including the allowances permitted for
depreciation, insurance premiums, Development
Rebate, Investment Allowances and losses suffered
by insured or uninsured perils.
Generally the premiums paid to an insurance
company are treated as a fully deductible expense,
however any amounts of the set aside for self
insurance is not so treated. Again, though losses
arising from both insured and uninsured is generally
tax-deductible, in claims received from insurers are
treated as taxable income.
Where insurances are arranged on reinstatement
value basis, the matter is further complicated by the
provisions of capital gains. Under this statute, any
Sashi Publications - www.sashipublications.com 193
Copyright@ The Insurance Times. 09883398055 / 09883380339
