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:
- In case of Life Insurance:
- First Year’s Commission
- Renewal Commission
- First Year’s commission and renewal commission where separate figures are not available
- Bonus commission
- Agent of Unit Trust of India
- Agent of Specified Securities
- 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 Income | Amount (Rs.) | Ad hoc deduction % | Ad hoc deduction Amount (Rs.) | Maximum allowable deduction | Taxable 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 Commission | 10000 | 50% | 5000 | 5000 | |
| 1.2 Renewal Commission | 10000 | 15% | 1500 | 1500 | |
| 1.3 First Year’s commission and renewal commission where separate figures are not available | 10000 | 33.33% | 3333 | 3333 [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 | 0 | No deduction | Fully taxable | ||
| Agent of Unit Trust of India | 1000 | 50% | 500 | 500 | 500 |
| Agent of Specified Securities | 10000 | 50% | 5000 | 5000 | 5000 |
| Agent of notified mutual fund u/s 10(23D) | 5000 | 50% | 2500 | 2500 | 2500 |
| Total | Total Deduction | 17833 | 28167 |
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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