The Taxation of the Annuity Fund

Extract

In 1952 the Statutes relating to income tax were gathered together into one consolidating Statute, the Income Tax Act, 1952 and the whole system of taxation of a life office is laid down in a few sections of this Act. The position has been modified by the passing of the Finance Act, 1956, but the effect of this will be considered in the latter part of these notes. A proper understanding of the relevant sections of the 1952 Act necessitates some knowledge of the fundamental principles of income tax in general as laid down in the Act. As it is the object of these notes to try to deduce as clearly and logically as possible from the Act how a life office is taxed with special reference to its annuity fund, it will therefore be desirable to refer briefly to some of these general principles.

Income is charged to tax in one of two ways, viz. by deduction of tax at the source by the payer of the income or by direct assessment on the recipient under one or other of the five Schedules A, B, C, D and E, enumerated in Section 1 of the Act.