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.

Are you the one who is paying rent exceeding INR 50,000/- p.m. for your residential property? Do you know that you are liable to deduct TDS on such an amount? 

We know, you have some common statements:

• How would department come to know that I am paying this much of the rent;
• This property is not used for business, this is my residential property;
• How would I comply with TDS returns and all, it is so complicated.

These days the Income Tax Department has flooded employees with notices who have declared rent paid exceeding INR 6,00,000/- for claiming HRA deduction while filing ITR but failed to deduct the TDS on the same. So, somewhere we furnish this information to the department on our own. 

So, if you are one of such person, basic provisions of Section 194-IB (Payment of rent by certain individuals or Hindu undivided family) that you should take care:

• Who is liable to deduct TDS: Individual\HUFs (who are having turnover of less than INR 1 Crores from business or INR 50 Lacs from profession in preceding financial year) are liable to deduct TDS under section 194IB.
• Nature of Property: TDS is applicable on rent paid for Land or building;
• Threshold Limit: TDS is to be deducted for the month in which rent payment exceeds INR 50,000/-;
• Due date of TDS Deduction: Such TDS shall deducted while paying rent of last month of the year or last month of the tenancy period;
• TAN requirement : Tenant is not required to obtain TAN for such TDS payment.;
• TDS Deposit challan cum return: TDS shall be deposited through Challan cum statement in Form 26QC (only PAN of the landlord is required).
• Due date of TDS Deposit: TDS shall be deposited within 30 days from the end of the month in which TDS is deducted. E.g., if TDS is deducted in March, 2025 then the same shall be deposited by 30th April, 2025.
• TDS Rate: TDS shall be deducted @ 2% (5% till 30.09.2024).