TDS on Payment to Partners| Remuneration, Interest, Commission| w.e.f. 01.04.2025| Section 194T
So Far, any payments to Partners have been kept outside the TDS ambit, i.e., TDS is not required to deduct on Remuneration, Commission, Bonus and Interest on Capital paid to Partners.
However, Finance (No. 2) Act, 2024 has inserted Section 194T to the Income Tax which provides for Deduction of TDS on payments to partners by a partnership Firm or LLP. Following the Key points:
🎯 Applicability: Section 194T is applicable to the payments made by partnership firms and LLPs to partners. The provisions shall come into effect from 1st April, 2025
🎯 Payments Covered: Section 194T covers Salary, Remuneration, commission, bonus and Interest of loan paid to partners.
🎯 Payment Outside the Ambit of Section 194T: Section 194T does not cover payment made for Repayment of loan, drawings and Reimbursement of Expenses.
🎯 Rate of TDS: TDS is to be deducted at the rate of 10%
🎯 Threshold Limit: Aggregate Threshold Limit for the purpose of TDS deduction shall be INR 20,000/-. If Aggregate Payment to partner exceeds INR 20,000/- then TDS shall be deducted.
🎯 Who is responsible for TDS Deduction: TDS is to be deducted by the Partnership Firm or LLP.
Every Partnership firm needs to take care of TDS provisions to avoid disallowance of Expense and penal consequences.
