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Can an audit is required under sec.44AB for insurance agent

Jaspreet Singh (Accountant) (327 Points)

02 December 2009

Plez tell me that an audit is required under sec 44AB of Income Tax Act 1961 for an insurance agent if its income exceeds Rs. 10 lacs a year?

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11 Replies

CA krishna Kamthe (Partner) (148 Points)
Replied 03 December 2009

As per Guidance note on Tax Audit

for Profession limit is 10 lacs and for Business it is 40 lacs for Tax Audit

Insurance Agent is comming under Business so Rule is to cross sales 40 lacs

so no Tax Audit Apply.

CA. Varun Soni (Chartered Accountant) (201 Points)
Replied 03 December 2009

i agree with CA krishna Kamthe

Sunil (Trader) (2611 Points)
Replied 07 December 2009

Jaspreetji, I have posted this elsewhere in this Forum. However, you apply your mind on the following basis:-

As per Income Tax Act, profession INCLUDES a vocation.

What is actually happening is a confusion of word Business, Profession, Vocation. All these are OCCUPATION of a person.

Real Estate Commission is a Business Receipt. All DTAAs recognise independent agents as doing business.

Architect, Chartered Accountant, Lawyers, Insurance Actuary,Company Secretary, Cost Accountant etc., Engineers, Doctors etc. are all recognised professions as they have memberships to associations that have a legal or parliamentary sanction without which they cannot practice in the field. Any person doing the work that is in the domain of these professions will also be deemed to be in these professions as per Income Tax. Therefore if you are not a lawyer but charge for legal advice, you are a legal professional. The department is least concerned whether you are eligible or not in your profession.

Besides these, there are also occupations that are deemed as professions. These are interior designers, models, film artistes, artists (painting). These do not have legally sanctioned bodies although they may have unions or associations (not by act of parliament). These too are considered as professions for Income Tax India.

Insurance Agent is a dependent agent carrying on his own business. Insurance Broker is an independent broker carrying on his own business. The receipt for both is identical and would be a business receipt. They are only licensed to do the business. If a business is regulated by license it does not become a profession.

Life will be much simpler for you if you consider the words business, profession, vocation and occupation as four different words. once you identify the difference and the thin dividing line between the latter 3, you will get the hang of it.

Venkat M (FCA) (133 Points)
Replied 03 February 2010

Tax audit will not apply in this case.

amit jain (Chartered Accountant) (532 Points)
Replied 22 February 2010

audit would be necessary if receipts from profession exceeds the prescribed limit...but insurance agent does not come in professionals

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 22 February 2010

Insurance Agent is not a professional. His receipts shall be considered under business income.

C.Balaji (Learner) (1867 Points)
Replied 23 February 2010

I do think that Insurance agent is not a professional........His income will be considered under business income.....so no tax audit......

Ajay Garg (CA FINAL) (101 Points)
Replied 20 July 2010

PLEASE TELL ME THAT ABOVE WHICH LIMIT RECEIPTS, BOOKS OF ACCOUNT MUST BE MAINTAIN U/S 44AA.

Ajay Garg (CA FINAL) (101 Points)
Replied 20 July 2010

IF ANY ONE HAVE CIRCULARS, GUIDANCE NOTE NO. ETC. ABOUT INSURANCE AGENT IS COVERED UNDER BUSINESS, THAN PLEASE GIVE ME SUCH COPY OR NUMBER OF SUCH REFERENCE.

BECAUSE I THINK SUCH RECEIPT FROM AGENCY IS COVERED UNDER PROFESSIONAL HEAD.

CA krishna Kamthe (Partner) (148 Points)
Replied 21 July 2010

Dear

Ajay

You can reffer Guidance note on Tax Audit under section 44AB of income tax act 1961 published by ICAI it is available in mumbai office also.

2 Like

Mayur Agrawal (Audit and Tax Practice) (657 Points)
Replied 15 June 2011

Whether we can calculate Insurance commission income @ 8 % or above under section 44AD ?

income from insurance and mutual fund business is also covered by circular nos. 594, 648, 677 for presumptive taxation if gross receipt is below Rs. 60000.

whether insurance commission is eligible for presumptive taxation u/s 44 AD