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Insurance commission

RAMA.S (FREELANCER-BOOK KEEPING & TAX CONSULTING/FILING) (23 Points)

12 July 2019

GOOD DAY,

MY CLIENT has received insurance commission from SBI of 350000/- in fy 18-19.

1. IN which itr to be filed ? ITR 3 OR ITR4.

2. If the assessee is eligible to claim any adhoc deductions like 15% or 33.33% of commission like LIC, UTI etc.

pls clarify.tnx

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5 Replies

CA. Umesh kumar (ca.umesh11@gmail.com) (1465 Points)
Replied 12 July 2019

File ITR 3

Laxmi Madnani (25 Points)
Replied 12 July 2019

ITR 3 should b filed

Suresh Thiyagarajan (Student) (3986 Points)
Replied 12 July 2019

1. Commission income from insurance will be taxable under the head Profits and gains from a business or profession (PGBP)
2. Insurance commission business will be a profession and it is not covered under the eligible business contemplated u/s 44AA and presumptive taxation scheme u/s 44ADA cannot be availed.
3. Hence it should be computed as normal professional income and since the commission income exceeds Rs. 60,000 no benefits of ad hoc deductions will be available against such income. Expenses incurred to earn the above income will be allowed as deductions. It is important to maintain proper books relating to receipts and expenses of the above profession in order to arrive at an actual profit.
4. Some of the conditions for claiming the expenses are,
i) It should have been incurred for the profession
ii) It should not be in the nature of capital expenditure
iii) It should not be in the nature of personal expenditure
iv) Expenses should have actually been incurred and no provision will be allowed.
5. Coming to filing return, ITR 3 shall be used as ITR 4 will be for assessee availing presumptive taxation scheme u/s 44AD, 44ADA, and sec 44AE. Insurance commission business will not be eligible for the above schemes hence ITR 3 shall be filed.
Please correct me if the above solution has an alternative view.