Requirement of tax audit

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siddharth dhoot (Querist)
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01 September 2013 One of my freind
earned LIC Commission of Rs
29 ,00, 000/ - and tds Deducted
by LIC is 2,96,006/- U/s 194(d) . He is required to get his accounts audited u/s 44AB?
Plz rply its urgent..

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 September 2013 HE IS NOT REQUIRED TO GET HIS ACCOUNTS AUDITED UP TO HIS COMMISSION RECEIPTS OF RS. 1 CRORE AS THE ACTIVITY HAS BEEN HELD TO BE
A BUSINESS.

siddharth dhoot

siddharth dhoot (Querist)
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02 September 2013 Sir but under which section it is written that commission income is business income. His CA ask him for doing tax audit as this income is treated as professional income.

Astaf Mansuri

Astaf Mansuri (Expert)
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02 September 2013 Commission income has not been included in the definition of the professional income, because agent is selling policies on behalf of LIC, And they are not providing purly professional services like doctors, CAs, Advocates Etc. so Agree with Expert.

siddharth dhoot

siddharth dhoot (Querist)
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02 September 2013 but my question is that how to conveyance CA that this income is business income.

siddharth dhoot

siddharth dhoot (Querist)
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02 September 2013 there is any case in income tax?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 Here’s a detailed explanation you can share with your CA regarding whether LIC commission income is treated as business income or professional income, and the applicability of tax audit under Section 44AB:

1. Is LIC Commission Income Business Income or Professional Income?
Commission received by LIC agents is generally treated as Business Income, not Professional Income.

The Income Tax Act does not specifically classify LIC commission as “professional income.”

Agents selling insurance policies earn commission as part of their business activity (agency business), not rendering a “professional service” like doctors, lawyers, or chartered accountants.

This distinction is important because tax audit threshold and provisions differ for business and professional income.

2. Applicability of Tax Audit under Section 44AB
Section 44AB requires tax audit if:

Business income exceeds ₹1 crore during the financial year, or

Professional income exceeds ₹50 lakhs.

Since LIC commission is business income, the threshold limit applicable is ₹1 crore.

In your friend’s case, commission income is ₹29,00,000, which is below ₹1 crore, so tax audit is not mandatory.

3. How to Convince Your CA?
Refer to various Income Tax department clarifications and case laws confirming commission income earned by agents is business income.

Relevant case laws supporting this view:

CIT vs. Mohan Singh [1980] 123 ITR 486 (Business income classification)

CIT vs. J.R. Pothan & Co. [1991] 191 ITR 58 (Business activity includes agency commission)

The Institute of Chartered Accountants of India (ICAI) and income tax manuals often treat LIC agency commission under business income.

4. Sample Explanation to CA
“Dear CA, please note that commission income from LIC agency business is treated as business income as per Income Tax practice and judicial pronouncements. Hence, tax audit under Section 44AB applies only if total business turnover exceeds ₹1 crore, which is not the case here. Therefore, tax audit is not mandatory for commission income of ₹29 lakhs.”

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