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Deductions available for lic agents

Dattaprasad (Audit Officer) (184 Points)

06 March 2012

Dear all,

i have to file the return of income for the FY 2010-11 before end of this month. pls let me know the deductions available from LIC commisssion.

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2 Replies

Anumanchipalli Sathikonda (Tax Consultant) (1349 Points)
Replied 06 March 2012

Mr.Datta Prasad

If the agent maintains books of account deductions can be claimed as recorded in the books of account if those expenses allowable under the provisions of Income-tax Act.

If the Agent does not maintain any books of account and his income from Commission received from Life Insurance Corporation is less than Rs.60,000/- for the concerned assessment year he can claim adhoc deductions as laid down in Circular No.648 dated 30-3-1993. For your easy and ready reference I am hereunder reproducing the Circular.

Please note that if the Commission exceed Rs.60,000/- for the concerned assessment year this Circular will not be helpful i.e. no adhoc deductions will be allowed the entire Commission will be subjected to tax.

To avoid the above difficulty the agent must maintain books of account and claim the expenses as recorded in the books of account.

Best Wishes

Sathikonda

CBDT CIRCULAR NO.648 DATED 30-03-1993

Whether benefit of ad hoc deduction to insurance agents of LIC, having total commission (including first year commission, renewal commission and bonus commission) of less than Rs. 60,000 for the year, and not maintaining detailed accounts for expenses incurred by them, may be allowed

1. The Board in F. No. 14/9/65-IT(A-I), dated 22-9-1965 (Annex I), as subsequently modified in Instruction No. 1546, dated 6-1-1984 (Annex II), had granted, subject to conditions therein specified, the benefit of ad hoc deduction in respect of the expenses incurred by agents of the Life Insurance Corporation.

2. In supersession of the above Circular and Instruction, the Board have decided that the benefit of ad hoc deduction to insurance agents of the Life Insurance Corporation having total commission (including first year commission, renewal commission and bonus commission) of less than Rs. 60,000 for the year, and not maintaining detailed accounts for the expenses incurred by them, may be allowed as follows :

?(i) ?where separate figures of first year and renewal commission are available, 50 per cent of first year commission and 15 per cent of the renewal commission;

(ii) ?where separate figures as above are not available 33¹/3 per cent of the gross commission.

In both the above cases, the ad hoc deduction will be subject to a ceiling limit of Rs. 20,000.

3. The ?gross commission? in (ii) above will include first year as well as renewal commission but will exclude bonus commission.

4. The complete amount of bonus commission is taxable and will be taken into account for purposes of computing the total income, and no ad hoc deduction will be allowed from this amount.

5. The benefit of ad hoc deduction will not be available to agents who have earned total commission of more than Rs. 60,000 during the year. The admissibility of the expenditure claimed by such agents will be decided by the Assessing Officers as per the provisions of the Income-tax Act.

6. This will apply to assessment year 1993-94 and subsequent years.

Circular : No. 648, dated 30-3-1993.