Taxability of insurance commission received by insurance
This query is : Resolved
27 November 2015
How to calculate income of insurance commission received by insurance agent.? please tel which ITR is applicable?
27 November 2015
file ITR-4. and you should know how to compute the profit!
28 November 2015
1) whether required to maintain books of account?
2) In ITR it is required to to give full details of Profit & Loss and Balance sheet?
2) In ITR it is required to to give full details of Profit & Loss and Balance sheet?
28 November 2015
If the volume is high and it is income from Business - ITR - 4
If the volume is low and the activity of commission agent is being pursued as a side activity while having substantially high revenue from Salary etc, then ITR-1 also should suffice the purpose.
If the volume is low and the activity of commission agent is being pursued as a side activity while having substantially high revenue from Salary etc, then ITR-1 also should suffice the purpose.
28 November 2015
How To Decide High volume? whether Turnover?
26 July 2025
Here’s a detailed answer to your queries regarding **taxability of insurance commission** received by an insurance agent and the **applicable ITR form**, **books of accounts**, and **"high volume"** clarification:
---
### ✅ 1. **Taxability of Insurance Commission**
* Commission income received by an insurance agent is **taxable as business income** under the head **“Profits and Gains from Business or Profession.”**
* If the agent is an individual and receives commission income (even if part-time), it is still **considered business income**, **not salary**.
---
### ✅ 2. **Applicable ITR Form**
* **ITR-4**:
Applicable **if you're declaring income under normal provisions** (maintaining books) or **using presumptive taxation u/s 44ADA/44AD** (if eligible).
* **ITR-3**:
If the agent has income from **business/profession not under presumptive taxation** and **maintains books of accounts**, ITR-3 is applicable.
* **ITR-1 / ITR-2**:
**Not applicable** for commission income—even if volume is small—because commission income is **not salary or other income**, it's **business income**.
> 💡 **Conclusion:** Use **ITR-3 or ITR-4** depending on whether you opt for presumptive taxation or maintain books of account.
---
### ✅ 3. **Is the Insurance Agent Required to Maintain Books?**
* **Section 44AA** applies.
* **Threshold for compulsory maintenance of books** (for individuals):
* **If income exceeds ₹2.5 lakh** OR **turnover/gross receipts exceed ₹25 lakh** in any of the 3 preceding years → **books must be maintained.**
---
### ✅ 4. **Presumptive Taxation u/s 44AD or 44ADA**
* **Section 44AD**: Not available for **commission or brokerage income** (explicitly excluded).
* **Section 44ADA**: Applicable only to **specified professionals** (like doctors, CAs, lawyers)—**not insurance agents.**
> ❌ Hence, insurance agents **cannot** opt for presumptive taxation under 44AD/44ADA.
---
### ✅ 5. **What is "High Volume"?**
There’s **no statutory definition** of "high volume." But practically:
* If **commission income** is a primary source of income (say, over ₹5–10 lakhs), or you have **multiple transactions**, or **substantial TDS under section 194D** is deducted, it is advisable to treat it as **full-fledged business activity** and file ITR-3 with **full profit & loss details**.
---
### ✅ 6. **TDS under Section 194D**
* If total commission exceeds ₹15,000 in a year, the insurer will **deduct TDS @ 5%** (for resident individuals).
* You can claim this TDS in your return against your final tax liability.
---
### ✅ Summary Table
| Criteria | Answer |
| ------------------------ | --------------------------------------------------- |
| **Tax Head** | Business or Profession |
| **Applicable ITR** | ITR-3 (normal books) / ITR-4 (if presumptive, rare) |
| **Books Required?** | Yes, if income > ₹2.5L or turnover > ₹25L |
| **Presumptive Taxation** | ❌ Not allowed for commission income |
| **TDS Applicable?** | Yes, u/s 194D if commission > ₹15,000 |
---
Would you like help preparing the computation or knowing how to structure your P\&L for this kind of income?
---
### ✅ 1. **Taxability of Insurance Commission**
* Commission income received by an insurance agent is **taxable as business income** under the head **“Profits and Gains from Business or Profession.”**
* If the agent is an individual and receives commission income (even if part-time), it is still **considered business income**, **not salary**.
---
### ✅ 2. **Applicable ITR Form**
* **ITR-4**:
Applicable **if you're declaring income under normal provisions** (maintaining books) or **using presumptive taxation u/s 44ADA/44AD** (if eligible).
* **ITR-3**:
If the agent has income from **business/profession not under presumptive taxation** and **maintains books of accounts**, ITR-3 is applicable.
* **ITR-1 / ITR-2**:
**Not applicable** for commission income—even if volume is small—because commission income is **not salary or other income**, it's **business income**.
> 💡 **Conclusion:** Use **ITR-3 or ITR-4** depending on whether you opt for presumptive taxation or maintain books of account.
---
### ✅ 3. **Is the Insurance Agent Required to Maintain Books?**
* **Section 44AA** applies.
* **Threshold for compulsory maintenance of books** (for individuals):
* **If income exceeds ₹2.5 lakh** OR **turnover/gross receipts exceed ₹25 lakh** in any of the 3 preceding years → **books must be maintained.**
---
### ✅ 4. **Presumptive Taxation u/s 44AD or 44ADA**
* **Section 44AD**: Not available for **commission or brokerage income** (explicitly excluded).
* **Section 44ADA**: Applicable only to **specified professionals** (like doctors, CAs, lawyers)—**not insurance agents.**
> ❌ Hence, insurance agents **cannot** opt for presumptive taxation under 44AD/44ADA.
---
### ✅ 5. **What is "High Volume"?**
There’s **no statutory definition** of "high volume." But practically:
* If **commission income** is a primary source of income (say, over ₹5–10 lakhs), or you have **multiple transactions**, or **substantial TDS under section 194D** is deducted, it is advisable to treat it as **full-fledged business activity** and file ITR-3 with **full profit & loss details**.
---
### ✅ 6. **TDS under Section 194D**
* If total commission exceeds ₹15,000 in a year, the insurer will **deduct TDS @ 5%** (for resident individuals).
* You can claim this TDS in your return against your final tax liability.
---
### ✅ Summary Table
| Criteria | Answer |
| ------------------------ | --------------------------------------------------- |
| **Tax Head** | Business or Profession |
| **Applicable ITR** | ITR-3 (normal books) / ITR-4 (if presumptive, rare) |
| **Books Required?** | Yes, if income > ₹2.5L or turnover > ₹25L |
| **Presumptive Taxation** | ❌ Not allowed for commission income |
| **TDS Applicable?** | Yes, u/s 194D if commission > ₹15,000 |
---
Would you like help preparing the computation or knowing how to structure your P\&L for this kind of income?
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