What is commission? #
The commission is the additional compensation paid to an employee when the target performance is achieved. It is provided to motivate the employee’s performance and is usually paid as a percentage linked to the achievement. For instance, the sales commission paid to the salesman when they achieve 100% sales will vary and will be higher if they achieve the target by 110% or 120% of the target sales.
How is commission calculated? #
Commission policy differs from organization to organization based on the nature of operations and the industry. Some follow percentage and some follow a slab rate for commission, the more it is beneficial to the employee it motivates the performance of the employees. Commission money received at the hands of employees is a taxable component as per the Income Tax Act.