How to decide Commission Income is Business or Profession Income?

Income Tax Act say that a person who is carrying the business and maintain the books of accounts of its business, as audited if the gross sales, receipts, turnover exceeds Rs. 60 Lacs for the Financial Year 2011-12 (The limit has been enhanced to Rs. 1 Cr from the F.Y. 2012-13). A person who is carrying on profession, the limit for audit for the F.Y. 2011-12 is Rs. 15 Lacs (From FY 2012-13, it is Rs. 25 Lacs). The following activities are considered as profession by virtue of section 44AA & Notifications No. SO-17(E) dated 12.1.77 & No. SO 2675 dated 25.9.1992:
Some Professions are as below:

• Legal
• Medical
• Engineering
• Architectural profession
• Accountancy or
• Technical consultancy or interior decoration
• Film artists
• Authorized representatives
• Company Secretary
• Information Technology
  

The income by way of commission is considered as business income & the tax audit would be compulsory only if the receipts exceeds Rs. 60 Lacs during F.Y. 2011-12 (Rs. 1 Cr from FY 2012-13).

It may be noted that brokerage or commission income cannot be offered for taxation u/s 44AD on presumptive basis. Hence, return cannot be filed in ITR-4S.

Posted in: Brokerage Income,Commission Income,Income From Other Sources,Income Tax Exemptions,Income Tax Planner