Lic agent

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 January 2014 My client has become a LIC Agent.
1.What all books of accounts are to be maintained by him??
2. When Sec 44AD would be applicable? Any Conditions to be fulfilled.

3.Further there is another issue which i want you comment upon
Many of his client deposit premium amount into his personal or sometimes current bank account. He withdraws the amount and pays cash in the LIC Branch. Would this attract penalties as per Income Tax Act.
If during Scrutiny we prove that i had withdrawn that sum and paid his premium would suffice or it would create a havoc.

Querist : Anonymous

Querist : Anonymous (Querist)

04 February 2014 Would anyone reply to my query

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2024 Certainly! Here’s a detailed breakdown of the responsibilities and compliance requirements for an LIC Agent:

### 1. **Books of Accounts for LIC Agents**

As an LIC Agent, maintaining accurate books of accounts is crucial for proper record-keeping and compliance with tax regulations. Here’s a list of the books and records typically required:

- **Cash Book**: To record all cash transactions, including receipts and payments.
- **Bank Book**: To record all transactions related to bank accounts.
- **Ledger**: To maintain a summary of all transactions categorized under various accounts.
- **Day Book**: To record daily transactions in chronological order.
- **Commission Receipts**: To record commission earned from LIC and any other income related to the agency.
- **Premium Receipts**: To document the premiums collected from clients and any payments made to LIC.
- **Expense Book**: To record expenses related to the business of being an LIC agent.

**Documentation**: Keep all relevant documents such as receipts, bank statements, premium payment proofs, and correspondence related to clients and LIC.

### 2. **Applicability of Section 44AD**

**Section 44AD** of the Income Tax Act provides for a presumptive taxation scheme for small businesses. Here’s when it applies and the conditions to fulfill:

**Applicability**:
- **Eligible Assessees**: Individuals, Hindu Undivided Families (HUF), and partnerships (other than LLPs) engaged in any business except those engaged in the profession of accountancy, interior decoration, etc.
- **Turnover Limit**: If the turnover is up to ₹2 crore in a financial year.
- **Income Declaration**: 8% of the turnover is deemed to be the income of the assessee.

**Conditions**:
- The agent must not be engaged in any profession referred to in section 44AA(1) of the Act.
- The agent should maintain books of accounts and get them audited if the turnover exceeds ₹1 crore, unless opting for presumptive taxation under Section 44AD.
- Must declare 8% of the turnover as income under this scheme.
- All income should be declared in the return of income.

### 3. **Handling Premium Payments**

If clients deposit premiums into the agent’s personal or current bank accounts and the agent then withdraws cash to pay the premiums to LIC, the following considerations are important:

**Potential Issues**:
- **Income Tax Scrutiny**: Such transactions could attract scrutiny as it involves cash handling and potentially unreported income.
- **Record Keeping**: In case of scrutiny, you need to provide clear documentation proving that the withdrawn amounts were used for paying premiums to LIC. This includes bank statements, deposit slips, and evidence of payment to LIC.

**Compliance Tips**:
- **Maintain Proper Records**: Ensure that all transactions are well-documented. This includes receipts from LIC, bank statements, and proof of cash withdrawals and deposits.
- **Avoid Cash Transactions**: If possible, try to avoid handling large sums of cash. Deposits directly into the LIC branch can help avoid these issues.
- **Regular Reconciliation**: Regularly reconcile your accounts to ensure that all transactions are accurately recorded and any discrepancies are addressed promptly.

**Penalties**:
- If it’s proven that the cash was used properly and the premiums were paid correctly, penalties may be avoided. However, inconsistent records or failure to prove the legitimacy of transactions might lead to penalties or legal issues.

### **Summary**

1. **Books of Accounts**: Maintain detailed records including cash book, bank book, ledger, and all transaction receipts.
2. **Section 44AD**: Applicable if turnover is up to ₹2 crore, and income is declared at 8% of turnover.
3. **Handling Payments**: Document all transactions thoroughly, and ideally, avoid using personal accounts for business transactions to prevent scrutiny.

Consulting with a professional accountant or tax advisor can provide further guidance tailored to your client’s specific situation and help ensure compliance with tax regulations.

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