Insurance Business Tax Return Filing Services

No. Under Section 44AD(6) and Section 44ADA of the Income Tax Act, persons earning income in the nature of commission or brokerage are explicitly prohibited from opting for presumptive taxation. Insurance agents, agency leaders, surveyors, and corporate brokers cannot declare presumptive profits at six percent or fifty percent. They must maintain formal books of accounts under Section 44AA and file income tax return Form ITR-3 (for individuals) or ITR-5/ITR-6 (for firms/companies), claiming actual business expenditures against commission earnings.

Under Section 194D of the Income Tax Act, insurance companies must deduct TDS on commission paid or payable to insurance agents and brokers. The applicable TDS rate is five percent for resident non-corporate agents (individuals, HUFs, and partnership firms) and ten percent for corporate insurance brokers and companies. The threshold for deduction is fifteen thousand rupees per financial year. For senior citizen agents submitting Form 15H or eligible individuals submitting Form 15G, no TDS is deducted if estimated total income is below the taxable threshold.

For insurance broking entities and agency businesses maintaining regular books of accounts, a statutory tax audit under Section 44AB is mandatory if gross annual commission or brokerage receipts exceed one crore rupees. However, if aggregate cash receipts and aggregate cash payments do not exceed five percent of total turnover and expenditure respectively, the tax audit limit is extended to ten crore rupees. Corporate broking entities must undergo statutory company audit regardless of turnover, and tax audit Form 3CA/3CD when crossing the income tax threshold.

When an insurance policy is cancelled or surrendered within the initial policy term, insurance companies initiate a commission clawback, debiting the unearned commission from the agent or broker subsequent commission statement. For income tax return filing, only net commission realized (gross commission minus clawback deductions) represents taxable business revenue, provided the clawback is supported by insurer debit notes and reconciles with net Form 26AS credits.

Insurance broking companies and corporate agencies that engage Point of Sales Persons (POSP) or sub-agents must deduct TDS at the rate of five percent under Section 194H on any commission or sub-brokerage payout exceeding fifteen thousand rupees in a financial year. The deduction must be made at the time of credit to the agent account or payment, whichever is earlier. Failure to deduct or deposit Section 194H TDS results in a thirty percent disallowance of the sub-brokerage expense under Section 40(a)(ia).

The applicable ITR form depends on the legal constitution of the insurance business. Individual insurance agents and freelance surveyors must file ITR-3 based on maintained books of accounts. Partnership corporate agencies, LLPs, and Association of Persons operating in insurance intermediation file ITR-5. IRDAI-licensed insurance broking private limited companies, corporate agency companies, and web aggregator corporations must file ITR-6.