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Rule 32(4) — life insurance business — value of supply where premium is allocated for INVESTMENT is:
ATotal premium charged
B10% of single premium
CTotal premium minus amount allocated for investment (if intimated to policyholder at the time of supply)
DDifference between sum assured and premium
Answer & Solution
Correct answer: C. Total premium minus amount allocated for investment (if intimated to policyholder at the time of supply)
1. Rule 32(4) — life insurance: value = gross premium MINUS amount allocated for investment / savings (if intimated to policyholder).
2. Single-premium annuity (other than under (a)): 10% of single premium.
3. All other cases (e.g. endowment, term plans): 25% of premium in 1st year and 12.5% in subsequent years.
_Source: ICAI BoS CA Final Paper 8, Ch 5 "Value of Supply", §Rule 32(4)_
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