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Home Income Tax ITR AY 2020-21 Individuals can Claim Ad hoc deduction in case of Commission Income

Individuals can Claim Ad hoc deduction in case of Commission Income

Individuals can Claim Ad hoc deduction in case of Commission Income

Do you know individuals having Agents Income (Commission Income) can get ad hoc deduction from their Income earned in the previous year?

An individual is required to File ITR-3 for the respective Assessment Year in case of Commission Income.

Ad hoc deduction is available to the taxpayers whose gross commission is less than or equals to Rs. 60,000/-.

Agents income can consist of the following Income heads:

  1. In case of Life Insurance:
  2. First Year’s Commission
  3. Renewal Commission
  4. First Year’s commission and renewal commission where separate figures are not available
  5. Bonus commission
  6. Agent of Unit Trust of India
  7. Agent of Specified Securities
  8. Agent of notified mutual fund u/s 10(23D)

Let us understand the computation of Individuals having Income of Agents with Ad hoc deduction.

Computation of Total Income

Income from Business or Profession (Chapter IV D)                                             28167
L.I.C.. First Year Commission 10000 
L.I.C.. Renewal 10000 
L.I.C.. Mix 10000 
U.T.I.. Agent 1000 
Post Office Agent 10000 
Mutual Fund Agent 5000 
Total Commission 46000 
Less: Ad Hoc Commission   
L.I.C.. First Year Commission @ 50%5000  
L.I.C.. Renewal @ 15%1500  
L.I.C.. Mix @ 33.33%3333  
U.T.I.. Agent @ 50%500  
Post Office Expenses @ 50%5000  
Mutual Fund Agent @ 50%2500  
Total Deduction 17833 
  28167 
Gross Total Income  28167
    
Total Income  28167
Round off u/s 288 A  28170
Commission IncomeAmount (Rs.)Ad hoc deduction %Ad hoc deduction Amount (Rs.)Maximum allowable deductionTaxable Income
In case of Life Insurance:   Note: Max. deduction in case of 1.1, 1.2 and 1.3 can be Rs.20,000/- 
1.1 First Year’s Commission1000050%50005000 
1.2 Renewal Commission1000015%15001500 
1.3 First Year’s commission and renewal commission where separate figures are not available1000033.33%33333333
[Total of 1.1,1.2 and 1.3 is Rs.9833]
i.e. deduction allowed is for Rs.9,833/-
Taxable Income for 1.1, 1.2 and 1.3 would be Rs.20,167/-
[Rs.30,000 -Rs. 9,8333/- (allowable deduction)]
Bonus commission  0No deduction Fully taxable 
Agent of Unit Trust of India  100050%500500500
Agent of Specified Securities1000050%500050005000
Agent of notified mutual fund u/s 10(23D)500050%250025002500
Total  Total Deduction1783328167

Read More: Individual Income Tax Computation with Interest u/s 234B and u/s 234C AY 2020-21

ITR-3 AY 2020-21 Individual: Computation of Total Income, Surcharge, Interest, and Tax Payable

CA Devesh Thakur

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