Section 194T: TDS Application

1. Section 194T, which mandates Tax Deducted at Source (TDS) on certain payments made by a firm to its partners, is applicable from the financial year 2025-26.
2.  It should be deducted based on accrual to capital account.

Section 194T applies from 1 April 2025. It requires the firm to deduct TDS at 10% on salary, remuneration, commission, bonus or interest credited or paid to a partner, if the aggregate exceeds ₹20,000 in the financial year. A credit to the partner’s capital account is included.

Accordingly, amounts credited or paid up to 31 March 2025 are not subject to section 194T, even if calculated under the partnership deed. For amounts credited or paid on or after 1 April 2025, deduct and deposit TDS as applicable; the partner’s advance-tax payment does not remove the firm’s deduction obligation. If an FY 2024–25 amount was only accrued in the firm’s accounts but not credited or paid to the partner until after 1 April 2025, the timing of that credit/payment should be checked before deciding.

For partnership-firm compliance, mapping remuneration and interest entries to the relevant credit or payment dates helps apply section 194T correctly. Manual tracking across partner ledgers and TDS records is difficult; automation reduces repetitive work while professional judgment remains in control. At Jir AI we provide 2,000+ AI agents and 650+ integrations to streamline your practice’s day-to-day workload. To explore how this could fit your workflow, connect with us on WhatsApp: https://wa.me/message/3HVOZ7HIY4ESC1

194T: on accrual or payment:

• TDS under 194T applies at the time of credit to the partner's account (including the capital account) or payment, whichever is earlier, if aggregate salary, remuneration, commission, bonus or interest exceeds Rs 20,000 in the FY. Year-end credit of remuneration (per the deed) triggers TDS then.

• Profit share (exempt) and capital withdrawals aren't covered.