In today’s freelance-driven economy, commission income is a common source of earning—whether you’re an insurance agent, mutual fund distributor, real estate broker, marketing consultant, or an affiliate marketer. However, many taxpayers are unsure how to correctly report commission income, whether they are eligible for presumptive taxation, and if books of accounts are mandatory.
This handout simplifies the tax rules for commission earners for Assessment Year 2025–26 (Financial Year 2024–25).
What is Commission Income?
Commission income is earned by agents or intermediaries for bringing business to the principal. It typically arises from:
- Selling goods or services on behalf of others
- Referrals in financial services
- Generating leads
- Affiliate or digital promotions
Tax Head: Income from commission is taxable under “Profits and Gains of Business or Profession (PGBP)”, as per Section 28 of the Income Tax Act.
Common Sources of Commission:
- Insurance or Mutual Fund Agent Commission
- Real Estate Broker Commission
- DSA (Banking Channel Agent) Commission
- Affiliate/Influencer Marketing Revenue
- Product Distribution Commission (retail/wholesale/online)
How to Report Commission Income in ITR?
| Particulars | Details |
| Nature of Income | Business Income (PGBP) |
| Applicable ITR Form | ✅ ITR-3 (mandatory if maintaining books) |
| Presumptive Scheme Allowed? | ❌ Not under 44AD. 44ADA also not applicable to commission income |
| Books of Accounts | ✅ Mandatory if income > ₹2.5 lakh (explained below) |
| TDS Section | Mostly under Section 194H (Commission/Brokerage > ₹15,000) |
| Reporting in ITR | Schedule BP (Profit & Loss), TDS Schedule, P&L/Balance Sheet if required |
Is Commission Income Eligible under Presumptive Taxation?
Section 44AD – Not Allowed
Commission or brokerage income is specifically excluded from the scope of Section 44AD, as per Section 44AD(6).
Section 44ADA – Not Allowed for Commission Income
Section 44ADA is applicable only to specified professions notified under Section 44AA(1) and Rule 6F, such as legal, medical, engineering, accountancy, and technical consultancy services.
Commission agents, brokers, DSAs, marketing consultants, media advisors, etc. are not notified professions under Rule 6F.
So even if your commission income is labelled as consultancy or advisory, you cannot claim Section 44ADA.
📌 For all commission-based earners, presumptive taxation under 44AD/44ADA is not available. You must file ITR-3 and maintain books.
Books of Accounts – When Mandatory?
As per Section 44AA(1) and Rule 6F, books of accounts are mandatory if:
- Gross receipts exceed ₹2.5 lakhs, and
- Income exceeds the basic exemption limit (₹2.5/₹3/₹5 lakh depending on age category)
Required Books:
- Cash Book
- Journal (if using mercantile system)
- Ledger
- Original Bills and Vouchers
- Expense Records
- Bank Statements
Failure to maintain books can attract a penalty under Section 271A – ₹25,000.
Step-by-Step: Filing ITR for Commission Income (ITR-3)
✅ Step 1: Choose the Correct ITR Form
File ITR-3 on the Income Tax e-Filing portal (www.incometax.gov.in)
✅ Step 2: Report Gross Commission Income
In Schedule BP, provide:
- Name & Nature of Business
- Gross Receipts
- Expenses (travel, communication, office, salary etc.)
- Net Profit
✅ Step 3: TDS Reconciliation
- Download Form 26AS and AIS
- Match reported income
- Claim eligible TDS under Section 194H
✅ Step 4: Fill Balance Sheet & P&L
If income crosses audit limit or books are maintained, fill:
- Capital Account details
- Balance Sheet (Assets, Liabilities)
- Profit & Loss Account (Receipts, Expenses)
✅ Step 5: Audit and Filing
- If audit required (due to turnover or profit < 6%/8%), get audit report u/s 44AB.
- Upload ITR using Aadhar OTP or DSC
Common Mistakes to Avoid
- Filing ITR-1/ITR-4 ineligible for commission income
- Reporting net receipts instead of gross receipts
- Ignoring TDS shown in Form 26AS
- Not maintaining books of accounts
- Claiming ineligible deductions (e.g., 44AD/44ADA presumptive)
Example
Mr. Amit, a freelance DSA agent, earns ₹9,20,000 in FY 2024–25 as commission. His expenses (travel, phone, staff) total ₹2,00,000. TDS of ₹92,000 was deducted by the bank under Section 194H.
- Gross Receipts: ₹9,20,000
- Expenses: ₹2,00,000
- Net Income (PGBP): ₹7,20,000
- ITR Form: ITR-3
- Books of Accounts: Mandatory
- Presumptive Taxation: ❌ Not Allowed
- TDS Credit: ₹92,000 (claimed in ITR)
Conclusion
If you earn commission income, especially in traditional brokerage or agency formats:
✅ Use ITR-3, not ITR-1 or ITR-4
✅ Maintain books of accounts if income > ₹2.5L
✅ Claim TDS after reconciling 26AS/AIS
✅ Avoid applying 44AD/44ADA presumptive schemes
