Insurance Commission

This query is : Resolved

CA Ankit Verma (Querist)
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03 July 2011 Dear Experts,
My friend is an LIC Advisor and during FY 2010-11 he has received Gross income of Rs. 56600/- (as first year commission) on which TDS of Rs. 5660/- & Serive Tax of Rs. 5285.50/- has been deducted.

Now my querries are....
[1] Why Service Tax rate more than 10.3% is charged on net value after TDS ?

[2] What will be be the net amount taxable?
i.e. Rs. 56600.00/- [Gross Value]
or Rs. 51314.50/- [56600.00-5285.50]

[3] On what amount will he be allowed the adhoc deduction of 50% on first year commission? & What will it be?

U S Sharma

U S Sharma (Expert)
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04 July 2011 1. service tax is not a deductible tax, it can be either paid/payable or exempted, nobody can "deduct service tax"

2. 56600

3. 1. The Board in F. No. 14/9/65-IT(A-I), dated 22-9-1965 (Annex I), as subsequently modified in Instruction No. 1546, dated 6-1-1984 (Annex II), had granted, subject to conditions therein specified, the benefit of ad hoc deduction in respect of the expenses incurred by agents of the Life Insurance Corporation.
2. In supersession of the above Circular and Instruction, the Board have decided that the benefit of ad hoc deduction to insurance agents of the Life Insurance Corporation having total commission (including first year commission, renewal commission and bonus commission) of less than Rs. 60,000 for the year, and not maintaining detailed accounts for the expenses incurred by them, may be allowed as follows :
� (i)� where separate figures of first year and renewal commission are available, 50 per cent of first year commission and 15 per cent of the renewal commission;
(ii)� where separate figures as above are not available 331/3 per cent of the gross commission.
In both the above cases, the ad hoc deduction will be subject to a ceiling limit of Rs. 20,000.
3. The �gross commission� in (ii) above will include first year as well as renewal commission but will exclude bonus commission.
4. The complete amount of bonus commission is taxable and will be taken into account for purposes of computing the total income, and no ad hoc deduction will be allowed from this amount.
5. The benefit of ad hoc deduction will not be available to agents who have earned total commission of more than Rs. 60,000 during the year. The admissibility of the expenditure claimed by such agents will be decided by the Assessing Officers as per the provisions of the Income-tax Act.
6. This will apply to assessment year 1993-94 and subsequent years.
Circular : No. 648, dated 30-3-1993.

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