Income tax filing is a duty that everyone should perform. Most people sneak out from this social responsibility. Every person is liable to file income tax. This article aims at income tax filing process as an insurance agent. As insurance agents don’t earn salary but commissions, the process of deduction of TDS and filing income tax is slightly different. With new policies in place, we have good news for insurance agents. We will cover that in this article. Moreover, you also learn to calculate your deductions and the process of filing tax. Newbies in the field will have more takeaways. Read on and know the explanation and income tax calculation of an assessment year.
Let us assume that you are an insurance agent whose name is Ashok. Before you joined the profession of an insurance agent, you worked for nine months during 2016-17 assessment year. In that phase, you contributed Rs 30,000 and Rs 60,000 towards EPF and PPF respectively.
After that, you joined an insurance company where you started to earn a commission. Working as an agent, you earned Rs 50000 as a commission in the next two months of the assessment year. The commission is a total of his new LIC opening and first-year commission and renewal commission. The divisions are Rs 45000 and Rs 5000 respectively. Now based on this, let us calculate the deductions and annual taxable income.
Salary when working: Rs 35000 per month. Therefore, working for ten months, the gross salary is Rs 350000.
Commission as an agent: Rs 45000 + Rs 5000
Deductions of commission for new policies: 50% of the amount if it is less than Rs 60000 (Rs 22500)
Deductions of commission for renewal: 15% of the amount (Rs 750)
Total commission earned: Rs 50000 – Rs 23250 = Rs 26750
80C Deductions: Rs 30000 + Rs 60000 = Rs 90000
Total Income: Rs 376750
Total Taxable Income: Rs 376750 – Rs 90000 = Rs 286750
Initially, it was a TDS deduction of 10 percent of the total agent commission in insurance earned. Later, it changed to 5 percent, and since 1st of Jun’17, budget brought about a sense of relief for the insurance agents. Rs 250000 is the bracket for insurance agents. If the taxable income is less than Rs 250000 in one financial year, you can exempt TDS deductions. You only must submit form 15G if you are less than 60 and 15H is you are more than 60. The two forms will prove that you fall under the non-TDS deduction category as your commission is below the bracket. This is just an example; however, you can use real-life figure and find the amount.
If the commission is more than the maximum amount, ITR-4 is your way to filing tax. Here’s what you need to know before filing your tax.
- There is two method of filing tax; online and offline. Offline is the preferred mode of filing; however, if the person filing is 80 years and more, offline mode is applicable
- You need to file tax for every business you have individually
ITR 4 is the ITR which helps you file presumptive business income under sections 44AD, 44ADA, and 44AE. If the annual turnover of the business exceeds more than Rs 2 crores, you need to fill ITR 3.
There is a structure for ITR 4. It has four parts, Part A, Part B, Part C, and Part D. You need financial details of the business. You can file the tax either online or offline. Offline is applicable on for those insurance agents who have long retired from their regular jobs and are over 60 years. Rest of the population will fill it online. You may not have all the required information ready, so taking help of a qualified CA can ease your task.
Your CA will guide you through every step. He or she may, however, ask you to fill in the details of the form. To make it easier and full proof, you can follow the sequence.
- Fill Part A
- Fill all the schedules
- Fill Part B
- Fill all the schedules
File your Tax by 31st Mar’18
Being new in the field of insurance, you will not face any challenge when you are ready with the documents and the calculation method. ITR 4 is the most commonly filled ITR by professionals.