194T: TDS on Payment of remuneration to partner by firm
The Finance Bill, 2024 introduces a new section 194T under the Income Tax Act to mandate the deduction of tax at source (TDS) by partnership firms on certain payments to partners. Key points of this amendment include:
Introduction of Section 194T:
Partnership firms must deduct TDS on payments such as salary, remuneration, commission, bonus, or interest to their partners.
TDS Rate and Threshold:
- The TDS rate is set at 10%.
- No TDS is required if the total payment to a partner does not exceed Rs 20,000 in a financial year.
Effective Date:
The new TDS provision will be effective from April 1, 2025 (Assessment Year 2025-26 onwards).
Timing of Deduction:
TDS must be deducted either at the time of crediting the sum to the partner’s account (including capital account) or at the time of actual payment, whichever occurs earlier.
This amendment aims to bring transparency and compliance in financial transactions within partnership firms.
