Tax on commision of 25 lacks
This query is : Resolved
23 June 2012
MY CLIENT GOT COMMISION INCOME OF 25 LACKS...HER TDS IS 2.5 LACKS...SHE DONT HAVE ANY BILLS IN HER NAME SO SHE CANT PRODUCE ANY RECORDS OF EXPENSES....WHO MUCH EXPENSES SHE CAN CLAIM IN SUCH CASE...ALSO WHAT CARE I HAVE TO TAKE FOR FILLING HER RETURN....I DONT HAVE EXPERIENCE FOR FILLING SUCH BIG RETURNS....PLZ GIVE UR GUIDENCE....7276993000
EGOURLY WAITING FOR YOUR HELP
EGOURLY WAITING FOR YOUR HELP
24 June 2012
if tds deducted and paid to govt, u have to file return showing the commission amount in full, if not paid show expense in different names, and try to found bills otherwise the purpose of paying such huge commision is if allowed u can pay it .. there is no problem file the itr accordingly
24 June 2012
Sir...TDS is deducted...also i wish to know she dont have any expenses records...in such case how much max. expenses i can show to avoid scutiny since in that case no records will be available to produce to AO.
24 June 2012
Claim estimated and reasonable expenses as 30% or 40%. In absence of books of accounts and vouchers the same will be allowed.
24 June 2012
RESPECTED EXPERT, CAN I USE "IF NO BOOKS OF ACCOUNTS MAINTAINED OPTION" FOR SUCH BIG INCOME OF RS.25 LACKS & SHOW ONLY GR/GP/EXP/NP & ONLY DEBTORS/CREDITORS/STOCK/CASH ONLY...WHETHER IN SUCH CASE PENALTY WILL BE LEVIED...?
26 July 2025
You're handling a case involving **Rs. 25 lakhs commission income**, and it's good you're approaching this with caution, especially since your client **has no books of accounts or expense records**. Let me give you a step-by-step guide with legal backing to handle this **safely and correctly**.
---
## 🔍 Situation Summary
* **Income:** ₹25 lakhs commission
* **TDS:** ₹2.5 lakhs already deducted (likely @10%)
* **No books or expense proofs available**
* **Goal:** Minimize scrutiny and avoid penalty while filing ITR
---
## ✅ 1. **Is Maintenance of Books Mandatory?**
### Under **Section 44AA (read with Rule 6F)**:
* **Commission agents** must **maintain books** if:
* Income > ₹1.2 lakhs (old threshold), or
* Turnover/Gross receipts > ₹10 lakhs
👉 **Yes**, your client is **mandatorily required** to maintain books of accounts. So, claiming "no books maintained" **is not legally valid** here.
---
## ✅ 2. **What if Books Are Not Maintained?**
If books are not maintained despite being mandatory:
* The **Assessing Officer (AO)** can **reject the return** and do **best judgment assessment** under **Section 144**.
* **Penalty under Section 271A** up to **₹25,000** can be levied for not maintaining books.
👉 So, you should **prepare basic books**, even if they’re based on reasonable estimates — not fake bills, but **plausible expense heads**.
---
## ✅ 3. **Reasonable Expense Estimation (No Bills)**
In practice, where no records exist, **estimated expenses** of **30–50%** are commonly accepted in scrutiny assessments, especially for commission income.
* Commission agents usually have:
* Office rent or home-office costs
* Travel
* Phone/internet
* Staff salaries or helper payments
* Miscellaneous admin costs
👉 If nothing can be proven, **30–40% of total receipts** can be shown as reasonable expenses, depending on business nature.
Example:
* ₹25,00,000 receipts
* ₹10,00,000 shown as reasonable expenses (40%)
* ₹15,00,000 = Net taxable business income
---
## ✅ 4. **ITR Form & Sections to Use**
* Use **ITR-3** (because commission income ≠ eligible for presumptive taxation under Section 44ADA or 44AD).
* Show income under **"Profits and Gains from Business or Profession"**.
* Mention TDS of ₹2.5 lakhs under **Schedule TDS** and claim credit.
---
## ✅ 5. **Avoiding Penalties**
* **Do NOT claim fake bills or inflate expenses without justification**.
* Prepare:
* Estimated **Profit & Loss statement**
* Basic balance sheet: Debtors, creditors, cash, etc.
* Maintain a **working file** for AO if scrutiny happens.
If you're transparent and reasonable, **penalty can be avoided** even if full records aren't available.
---
## 📌 Summary:
| Point | Action/Advice |
| -------------------------------- | ------------------------------------------ |
| Books required? | ✅ Yes, under Section 44AA |
| No records of expense? | ✅ Estimate 30–40% expenses conservatively |
| TDS claimed | ✅ Yes, in Schedule TDS of ITR-3 |
| ITR Form | 📝 ITR-3 |
| Presumptive scheme (44AD/44ADA)? | ❌ Not applicable to commission income |
| Penalty risk | ⚠️ Under Sec 271A if no books are kept |
| Best approach | Prepare estimated P\&L, show reasonable NP |
---
If you'd like, I can help draft the **P\&L statement**, **balance sheet**, or even guide you through **ITR-3 filing step-by-step**.
Let me know!
---
## 🔍 Situation Summary
* **Income:** ₹25 lakhs commission
* **TDS:** ₹2.5 lakhs already deducted (likely @10%)
* **No books or expense proofs available**
* **Goal:** Minimize scrutiny and avoid penalty while filing ITR
---
## ✅ 1. **Is Maintenance of Books Mandatory?**
### Under **Section 44AA (read with Rule 6F)**:
* **Commission agents** must **maintain books** if:
* Income > ₹1.2 lakhs (old threshold), or
* Turnover/Gross receipts > ₹10 lakhs
👉 **Yes**, your client is **mandatorily required** to maintain books of accounts. So, claiming "no books maintained" **is not legally valid** here.
---
## ✅ 2. **What if Books Are Not Maintained?**
If books are not maintained despite being mandatory:
* The **Assessing Officer (AO)** can **reject the return** and do **best judgment assessment** under **Section 144**.
* **Penalty under Section 271A** up to **₹25,000** can be levied for not maintaining books.
👉 So, you should **prepare basic books**, even if they’re based on reasonable estimates — not fake bills, but **plausible expense heads**.
---
## ✅ 3. **Reasonable Expense Estimation (No Bills)**
In practice, where no records exist, **estimated expenses** of **30–50%** are commonly accepted in scrutiny assessments, especially for commission income.
* Commission agents usually have:
* Office rent or home-office costs
* Travel
* Phone/internet
* Staff salaries or helper payments
* Miscellaneous admin costs
👉 If nothing can be proven, **30–40% of total receipts** can be shown as reasonable expenses, depending on business nature.
Example:
* ₹25,00,000 receipts
* ₹10,00,000 shown as reasonable expenses (40%)
* ₹15,00,000 = Net taxable business income
---
## ✅ 4. **ITR Form & Sections to Use**
* Use **ITR-3** (because commission income ≠ eligible for presumptive taxation under Section 44ADA or 44AD).
* Show income under **"Profits and Gains from Business or Profession"**.
* Mention TDS of ₹2.5 lakhs under **Schedule TDS** and claim credit.
---
## ✅ 5. **Avoiding Penalties**
* **Do NOT claim fake bills or inflate expenses without justification**.
* Prepare:
* Estimated **Profit & Loss statement**
* Basic balance sheet: Debtors, creditors, cash, etc.
* Maintain a **working file** for AO if scrutiny happens.
If you're transparent and reasonable, **penalty can be avoided** even if full records aren't available.
---
## 📌 Summary:
| Point | Action/Advice |
| -------------------------------- | ------------------------------------------ |
| Books required? | ✅ Yes, under Section 44AA |
| No records of expense? | ✅ Estimate 30–40% expenses conservatively |
| TDS claimed | ✅ Yes, in Schedule TDS of ITR-3 |
| ITR Form | 📝 ITR-3 |
| Presumptive scheme (44AD/44ADA)? | ❌ Not applicable to commission income |
| Penalty risk | ⚠️ Under Sec 271A if no books are kept |
| Best approach | Prepare estimated P\&L, show reasonable NP |
---
If you'd like, I can help draft the **P\&L statement**, **balance sheet**, or even guide you through **ITR-3 filing step-by-step**.
Let me know!
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