INCOME TAX

Commission earned by insurance agents of Life Insurance Corporation--Allowance of expenditure

Circular No. 648

Dated 30/3/1993

The Board in F. No. 14/9/65-ITA-I, dated 22nd September, 1965, as subsequently modified in Instruction No. 1546, dated 6th January, 1984, had granted, subject to conditions therein specified, the benefit of ad hoc deduction in respect of the expenses incurred by agents of the Life Insurance Corporation.

2. In supersession of the above circular and instruction, the Board have decided that the benefit of ad hoc deduction to insurance agents of the Life Insurance Corporation having total commission (including first year commission, renewal commission and bonus commission) of less than Rs. 60,000 for the year, and not maintaining detailed accounts for the expenses incurred by them, may be allowed as follows :

(i) where separate figures of first year and renewal commission are available, 50 per cent. of the first year commission and 15 per cent. of the renewal commission ;

(ii) where separate figures as above are not available, 33     per cent. of the gross commission.

In both the above cases, the ad hoc deduction will be subject to a ceiling limit of Rs. 20,000.

3. The " gross commission " in (ii) above will include the first year as well as the renewal commission but will exclude bonus commission.

4. The complete amount of bonus commission is taxable and will be taken into account for purposes of computing the total income, and no ad hoc deduction will be allowed from this amount.

5. The benefit of ad hoc deduction will not be available to agents who have earned total commission of more than Rs. 60,000 during the year. The admissibility of the expenditure claimed by such agents will be decided by the Assessing Officers as per the provisions of the Income-tax Act.

6. This will apply to the assessment year 1993-94 and subsequent years.

(Sd.) O. P. Kakralia,

Under Secretary to the Government of India.