Budget 2024 introduced Section 194T, making certain payments from partnership firms (including LLPs) to partners liable for TDS. Previously, such payments were exempt from TDS, with deductions applicable only to employee payments. This new provision, to effective from 1st April 2025.
Payments Covered Under Section 194T
Section 194T applies to the following payments made by a firm to its partners:
- Salary
- Remuneration
- Commission
- Bonus
- Interest (on capital account, loan account, or any other account)
TDS Rate and Threshold Limit
- Rate: TDS is deducted at 10%.
- Threshold: Deduction applies only if aggregate payments to a partner exceed Rs. 20,000 in a financial year.
Timing of TDS Deduction
TDS under Section 194T is deducted at the earlier of:
- Credit of the payment to the partner’s account in the firm’s books (including capital account).
- Actual payment to the partner.
What is not Covered
- Withdrawal of capital by a partner
- Profit distribution among the partners
THANKS FOR SHARING ARTICLE
Normally new tax proposals for the next financial year presented in a Budget will effect form the very next financial year.
Insertion of 194T presented in Budget 2024 will be effective after one year ie, 01.04.2025. That’s why everybody having a confusion about the applicable date of 194T
@Nimai Kumar Banerjee… Though in normaly practice the Remuneration were decided much later on say after about four five months of the end of FY, however in books the entry was being posted on last day of the FY i.e. March 31. Now every firm has to complete books by April 20 or so but before April 30 so that the due TDS on remuneration could be deposited by 30th April. If the TDS is deducted and deposited late causing filing of late return of TDS then it would result into penalty and interest.
From when this section will be applicable. Pl be specific whether it is AY 2025-26 or AY 2026-27.
Early response is solicited.
Section 194T is applicable from FY:2025-26 (AY: 2026-27)
PAYMENT /CREDIT OF PARTNERS’ REMUNERATION GENERALLY CALCULATED & EFFECTED 3-4 MONTHS AFTER THE FINANCIAL YEAR, IT MEANT FOR.
IN THAT CASE ,WHEN & HOW THE SAID TDS WILL BE DEDUCTED AS WELL AS DEPOSITED.
HOW THE SAME CAN BE CONSIDERED AT THE FILING OF IT RETURN FOR THE CONCERNED AY.
The TDS related to March needs to be determined and deposited by 30th April and TDS Returns are to be filed by 31st May. Anything beyond these dates would be treated as violation. Will advise consultation with a tax expert in the regards.