ITR for income from brokerage commision

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 July 2011 Dear Sir

if person have income from only commission from share broking. Which ITR he should use for filing income tax returns .Can he claim expenses incurred for earning commision.

CA Navin Jain

CA Navin Jain (Expert)
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05 July 2011 FILE THE ITR-4 AND CLAIM ALSO EXP RELATED TO INCOME

Querist : Anonymous

Querist : Anonymous (Querist)

06 July 2011 but ITR 4 IS FOR BUSINESS AND PROFESSION INCOME.BUT COMMISION FROM SHARE BROKING WHETHER TO BE INCLUDE IN BUSINESS INCOME OR OTHER INCOME. INDIVIDUAL HAVENT MAINTAINED BOOKS . INDVIDUAL IS SUB BROKER OF EXCHANGE

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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02 August 2024 For an individual earning income from brokerage commission as a sub-broker in share trading, here's how to approach filing the Income Tax Return (ITR):

### Suitable ITR Form

1. **ITR-3:**
- **Use Case:** If the individual earns commission from share broking and is considered to be engaged in a business or profession (e.g., a sub-broker), **ITR-3** is the appropriate form to use.
- **Reason:** ITR-3 is used for individuals who have income from a business or profession. Since the individual is a sub-broker and earns commission from trading activities, it falls under business income, even if the books of accounts are not formally maintained.

2. **ITR-4 (Sugam):**
- **Use Case:** If the individual had income from a profession that is not maintained as books of accounts but falls under presumptive taxation schemes, ITR-4 might be applicable. However, brokerage commission income typically does not fall under the presumptive taxation scheme unless it fits specific criteria (e.g., certain professions under Section 44ADA).
- **Reason:** Since the brokerage commission is from a business activity, ITR-4 is generally less suitable unless the income qualifies for the presumptive taxation under Section 44ADA, which is uncommon for brokerage commissions.

### Claiming Expenses

- **Deductible Expenses:**
- The individual can claim business-related expenses incurred to earn the commission income. These may include office expenses, communication expenses, and other expenses directly related to earning the commission.

- **Expenses in ITR-3:**
- In ITR-3, expenses should be reported in the Profit and Loss Account under the "Business Income" section. Even if the books of accounts are not maintained, the individual should report the income and claim expenses as per actuals.

### Filing Details

1. **Income Section:**
- Report the commission income under the "Business Income" section of ITR-3.

2. **Expenses Section:**
- Deduct the expenses from the gross commission income to arrive at the net business income.

3. **Presumptive Taxation:**
- If the individual is eligible for any presumptive taxation scheme (e.g., Section 44ADA), it should be checked if applicable. However, this is less common for brokerage commissions.

### Summary

- **For Income from Brokerage Commission:** Use **ITR-3** for filing returns if the income is from a business/profession.
- **Claiming Expenses:** Report and claim business-related expenses in the Profit and Loss section of ITR-3.
- **Maintaining Books:** Even if books are not formally maintained, the individual should keep records of income and expenses for accuracy and compliance.

If you need more detailed advice or have specific circumstances, consulting with a tax professional can be beneficial to ensure compliance with current tax laws and regulations.