Income Tax Return for an Insurance Agent
As a commission-based professional, your income as an insurance agent depends on how many policies you sell and retain. But when tax season arrives, questions often arise:
- How do I report commission income?
- Which ITR form do I need to file?
- Can I claim expenses?
- Is presumptive taxation available?
- How is TDS handled?
Let’s answer all of these — with the help of a real-life case study.
🔍 TDS on Insurance Commission
✅ Who Deducts TDS?
As per Section 194D of the Income Tax Act, LIC or the insurance company deducts TDS when paying you commission:
- For procuring new insurance business
- For renewals or continuation of policies
✅ TDS Rates:
| Recipient Type | TDS Rate |
|---|---|
| Individual / HUF (with PAN) | 2% |
| If PAN not provided | 20% |
| Company | 2% |
📌 No TDS if total commission paid is below ₹20,000 in a financial year.
📌 You can submit Form 15G/15H to avoid TDS if your income is below the basic exemption limit and tax payable is nil.
❌ No Presumptive Taxation under Section 44AD
Commission agents cannot opt for presumptive taxation under Section 44AD.
However, ad-hoc deductions are allowed for insurance agents (explained below). Also, if your gross receipts exceed the threshold, you must maintain books of accounts under Section 44AA.
👤 Full-Time vs Part-Time Agents
- Full-time agents: Income taxable under “Profits and Gains of Business or Profession”
- Part-time agents (only renewal commission): Can be taxed under “Income from Other Sources”
📘 Case Study: Gaurav the LIC Agent
Let’s understand with a simple example.
Gaurav worked 10 months as a salaried employee earning ₹45,000/month. He later started as a LIC agent, earning:
- ₹34,000 from new policies (first-year commission)
- ₹25,500 from renewals
He spent ₹8,500 on phone & travel for insurance business. Also contributed ₹36,000 to EPF and ₹50,000 to PPF.
🔹 Commission Income Calculation
| Description | Amount (₹) |
|---|---|
| First Year Commission | 34,000 |
| Less: 50% deduction | 17,000 |
| Renewal Commission | 25,500 |
| Less: 15% deduction | 3,825 |
| Total Deduction Allowed | ₹20,825 |
| But capped at | ₹20,000 |
| Net Taxable Commission Income | ₹39,500 |
📝 Note: Other expenses like ₹8,500 spent on phone/travel cannot be claimed if ad-hoc deduction is used.
If exact breakup is not available, then 33.33% of total commission is allowed as deduction.
🔹 Total Taxable Income
| Income Source | Amount (₹) |
|---|---|
| Salary (₹45,000 x 10) | ₹4,50,000 |
| Less: Standard Deduction | ₹50,000 |
| Taxable Salary | ₹4,00,000 |
| Commission Income (Net) | ₹39,500 |
| Gross Total Income | ₹4,39,500 |
| Less: 80C Deductions (EPF + PPF) | ₹86,000 |
| Total Taxable Income | ₹3,53,500 |
🧾 Which ITR Form Should Insurance Agents Use?
❌ ITR-4: Not applicable, as insurance commission is ineligible for presumptive tax under Section 44AD.
✅ ITR-3: Must be filed under “Business or Profession” head.
📌 ITR-3 allows you to report commission income and claim applicable deductions (ad-hoc or actual, as applicable).
📅 Due Date for Filing
The last date for filing income tax return (for individuals not requiring audit) is:
🗓️ July 31, 2025 for FY 2024–25 | Extended up to September 15, 2025
💬 Have Questions?
We helped Gaurav file his ITR-3 and claim all eligible deductions. If you’re an insurance agent and confused about how to file your taxes correctly:
📧 Write to us at: ankush@aaaa.co.in
🌐 Visit: aaaa.co.in
✅ FAQs
Q1. Can an insurance agent opt for presumptive taxation?
A: No. Insurance agents earning commission income cannot use Section 44AD presumptive scheme.
Q2. Can I use the new tax regime?
A: Yes, you may opt for it if beneficial, but you lose 80C and other deductions.
Q3. Do I need to maintain books of accounts?
A: Yes, if your income exceeds limits or you’re not using ad-hoc deduction.
Q4. What is the due date for ITR filing?
A: July 31 of the assessment year (unless extended).
