Income Tax Return for an Insurance Agent

Understanding Income Tax for Insurance Agents

Income tax return is a statement of income and tax that needs to be submitted by taxpayers to the Income Tax Department in the prescribed form. The different forms available include ITR - 1 SAHAJ, ITR - 2, ITR - 3, ITR - 4 Sugam, ITR - 5, ITR - 6 and ITR - 7. Insurance agents are required to file their returns using ITR - 3. In this article, we will look into how insurance agents need to go about filing income tax returns.

TDS on Commission

Insurance agents typically earn money in the form of commissions from the sale of insurance policies. Now, similar to how income tax is levied on salaries, it is charged on the insurance commission earned by the agents. Section 194D of the Income Tax Act, 1961, pertains to the TDS applicable on insurance commission. As per this Section, tax deduction must be undertaken by an entity responsible to make payments to a resident, in terms of remuneration or reward, be it by commission or otherwise, for the purpose of i) petitioning or obtaining insurance business or ii) continuance, renewal or revival of policies of insurance.

Insurance agents earning commission are required to file their returns using ITR - 3. It is essential to note that an entity whose income is by way of commission or brokerage cannot adopt the presumptive taxation scheme of Section 44AD. Now, given that insurance agents typically earn money in the form of commission, they cannot adopt the presumptive taxation scheme of Section 44AD.

Some of the details that need to be filled in ITR - 3 are:

• General information and Nature of Business
• Balance Sheet as of March 31, 2019 of the Proprietary Business or Profession
• Profit and Loss Account for the financial year 2018-19
• Computation of income from business or profession

Source: Income Tax Department

There are two ways by which returns can be filed through ITR - 3. Once the returns are filed, the taxpayer will receive an acknowledgement in ITR V from the Income Tax Department. A signed copy of the form has to be sent to the Income Tax Department’s CPC office in Bangalore.