Guide to Tax Return For Insurance Agent

As a commission-based job, the income of the insurance agent mainly depends on the number of clients they manage to rope in. If you are an insurance agent, you want to know how to go about filing your income tax return. This is the place where all of your questions like which income tax return form to file. And how to report insurance commission income and how to claim certain expenses in your return among others are properly answered. Let’s discuss this through a case study and understand about Tax Return For Insurance Agent.

Understanding Tax Return For Insurance Agent.

Let us understand this through a case study;

Meet Mr.Gaurav – He works for 10 months in the financial year 2017-18 with LIC ltd company and earns a salary of Rs 45,000 per month. Gaurav starts working as an insurance agent, starting in February 2018. Also, the total commission that Gaurav earns in a year earn is Rs 59,500. Out of which Rs 34,000 is earning from commissions from LIC policies (sales of new policies and first year’s commissions) and remaining Rs 25,500 is earning from the renewal of LIC policies.

Moreover, he just starts his commission work – he does not maintain any type of records relating to his agent work. Gaurav also pays Rs 8,500 in telephone calls and commute, which was spent exclusively in securing these commissions. Gaurav contributes Rs 36,000 to EPF  in his job and investment Rs 50,000 in the PPF plan.

Firstly, let us help Gaurav to find out how to calculate his income from the beginning of his job as an insurance agent.

If the commission earning is less than Rs 60,000, the deduction on the first year’s commission is 50% of the commission. In the case of the renewal of commission, the deduction available is 15%. Moreover, the maximum deduction should have a limit of Rs 20,000.

First year’s commission = Rs 34,000

Deduction: 50% = Rs 17,000

Renewal Commission = Rs 25,500

Deduction: 15% = Rs 3,825

Total Deduction = Rs 20,825, but the maximum deduction permission in only up to Rs 20,000.

Also, do note that no other type of expense is can be deducted from this insurance commission.

In case, the separate figures are not available then 33 ⅓ % of the gross commission will have permission as a deduction.

How to calculate Total Taxable Income

Taking the figures from the above case study:

As Gaurav is an insurance agent his total income from salary is = Rs 45,000 x 10 = 4,50,000

Also, As an insurance agent Gaurav’s total income from insurance commission is= Rs 34,000 + 25,500 – 20,000 (deductions) = Rs 39,500

Gross total income for Gaurav = Rs 4,89,500

Deductions as per section 80C for Gaurav = Rs 36,000 EPF + Rs 50,000 PPF = Rs 86,000

Total Taxable Income = Rs 4,89,500 –  Rs 86,000 = Rs 4,03,500

Read More: Best Tax Saving Investment

Which Income Tax Return to file

Gaurav also has knowledge about the presumptive method of taxation and wants to know, whether an insurance advisor can file ITR-4 or not.

Gaurav is not eligible so he can file ITR-4. This is because of those who carry on

• business
• or profession of Income from commission
• or brokerage
• an agency business

are not having permission to file ITR-4S. As well as, those who are in the profession of

• legal,
• medical,
• engineering,
• architectural,
• accountancy,
• technical consultancy,
• interior designing, etc

(See the list of eligible businesses for which one is able to file ITR-4 here). Moreover, Gaurav earns income as an insurance agent – he can file ITR3.

FAQ’s for Tax Return For Insurance Agent

Q1. Which ITR should be filed for salary from the commission?

If your Commission income is greater than your salary income, then your primary income is Commission & it will be a business income, but the negative part is that you can not avail the benefit of Filling Return under the Presumptive scheme under the Sec-44AD. So in AY 2018–19 you can not file ITR 4, you need to file ITR 3.

Q2.Who can file ITR under 44ad?

The Sugam ITR-4S form is the Income Tax Return form for taxpayers who have to choose the presumptive income scheme under Section 44AD and Section 44AE of the Income Tax Act. Moreover, if the turnover of the business shown above exceeds Rs 2 crores, the taxpayer will have to file ITR-4.

Q3. What expenses can we claim against commission income?

Yes, all expenses against commission income are deductible while we are filing your income tax return. Also, normally speaking, if you itemize your deductions (instead of taking the standard deduction), you can deduct your allowable expenses incurred in them to produce your income whether salary or commission.

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