09 February 2010
Respected All, An insurance agent is having total commission income of Rs. 25,00,000 out of which Rs.20,00,000 is out of renewal commission and only Rs.5,00,000 is out of first year commission.
The agent shows total expense of Rs. 8,00,000. Further it want to show Rs.3,00,000 as referral fees paid on first year commission earned.
Since the renewal commission is fixed and nothing is required to be done to earn the same, is it allowed to show the total expense of Rs. 11,00,000(8+3)against the first year commission of only Rs.5,00,000.
10 February 2010
If you maintain books of account for all the expenses incurred togetherwith vouchers and evidences; then there will not be a problem.
Right now, department's criteria is that if net income is less than 40% of the gross receipts disclosed with respect of professional income; then these cases are selected for scrutiny.
So in your cases; you will not face any difficulty from department.
01 August 2024
Yes, insurance broking income is considered professional income, and if the gross receipts exceed ₹10,00,000, a tax audit under Section 44AB of the Income Tax Act is required. Here’s how it works:
### **Professional Income and Tax Audit:**
1. **Nature of Income:** - **Insurance Broking**: Income earned by an insurance broker from commissions on insurance policies is classified as professional income. Insurance brokers provide advisory and intermediary services, which fall under the category of professional services.
2. **Tax Audit Requirements:** - **Section 44AB**: This section mandates a tax audit for professionals if their gross receipts exceed ₹10,00,000 in a financial year. The tax audit must be conducted by a Chartered Accountant. - **Threshold Limit**: As per the Income Tax Act, if the gross receipts from insurance broking or any professional service exceed ₹10,00,000 in a financial year, the professional is required to get their accounts audited under Section 44AB.
3. **Compliance and Documentation:** - **Audit Report**: The Chartered Accountant will provide an audit report in Form 3CB/3CD, which needs to be submitted along with the income tax return. - **Accounting Records**: The professional must maintain proper books of accounts, including records of all transactions related to the insurance broking activities.
4. **Filing of Returns:** - **Income Tax Return**: The audited accounts and tax audit report must be filed along with the income tax return before the due date.
### **Key Points to Note:**
- **Gross Receipts Calculation**: Gross receipts include all income received from insurance broking activities before deducting any expenses. - **Audit Compliance**: Failure to get a tax audit done when required may result in penalties and difficulties in filing the income tax return.
In summary, if you are an insurance broker and your gross receipts exceed ₹10,00,000, you are required to conduct a tax audit under Section 44AB and comply with the related documentation and filing requirements.
CAclubindia
