10 October 2012
One of my clients is Insurance Agent the commission earned during a/y 2011-12 is around 250000/- and he recd Form 16A also. Since he is doing the business/Agency from a residential rental home can he show rent paid in P& L a/c. what are all the other expenses he can show(entitled) in P & L. Since this is the only income is he liable to maintain books of a/c.?
10 October 2012
Hello sir, Yes he can claim the rent of that house in his P&L a/c but the proportionate expenditure only if he uses the house both for office and residential purpose. Other expenditures allowable is like Traveling expenditure, Telephone expenditure, salary, office maintain expenses like that which are related to such commission earned.
According to the new amendment to the section 44AD insurance commission agents also liable to such section i.e minimum 8% profit has to offer on their gross turnover and who are offering their income according to the section 44AD no need to maintain books of accounts. So in your case according to the section 44AD income is Rs.20000. So if you offering above or more than such above income for income tax purpose then no need to maintain books of accounts. In case if you offering lower than such income then you have to maintain books of accounts.
10 October 2012
Section 44AD and ITR 4S is not applicable to commission business with retrospective effect of the day it was introduced. Therefore if your income from business or profession is more than 120,000 you have to maintain books.
Your books are simple. You just need to make a receipts register in which you record all your receipts (including the TDS deducted) and that is your turnover of business. Please use only one bank account (preferably current account in individual name. You will show only balance in this account in scheduled b/s alongwith whatever cash is available with you from your business. If your accounting system is mercantile which is preferable considering you get Form 16A and would like to claim all your taxes paid, you will also have to show the income receivable after TDS done for 31/3 which may have been paid in April as a sundry debtor. try and pay all your bills like phone etc before 31/3 so you do not have to show any creditors.
Do not use the same bank account for depositing other cheques or incomes (like salary or share investments etc and dividends etc.)
Now if you used a saving account exclusively for this business, you will have interest credited to it. Supposeing you placed money from this account on interest with bank and they pay back to this account itself with interest then also you have interet reflecting in this. You will have to first show all this in your shedule pl as profit carried to balance sheet. When you make the schedule for business income / profesional income at that time you will enter the amount of interest in the column income from p&l account taxable under other heads. This will reduce the interest from your business income and then you put it under other sources.
As you are liable to make books of account because of your income from the activity, you have to File ITR 4. If you do not need to maintain books (turnover below 10 lakhs and income from business or profession below 1.2 lakhs) then you need to only fill the no accounts case of this form.
CA will expect you to write at least details of receipts and date wise dtails of expenses fom which books can be derived and help you write out form itr 4.
CAclubindia
