TDS on Partner Remuneration

As per the Income Tax Act, 1961, a partnership firm is required to deduct TDS on remuneration paid to its partners, even if the firm is not liable to deduct TDS on payments made to other persons. TDS on Partner's Remuneration: - *Section 194A*: Not applicable, as it deals with TDS on interest payments. - *Section 194C*: Not applicable, as it deals with TDS on contract payments. - *Section 194J*: Applicable, as it deals with TDS on professional fees, technical fees, and remuneration paid to partners. Partner's Remuneration: - *Definition*: Remuneration includes any payment made to a partner for services rendered, including salaries, commissions, and bonuses. - *TDS rate*: The TDS rate on partner's remuneration is 5% (Section 194J). Important Points: - *TDS applicability*: TDS is applicable on remuneration paid to partners, regardless of the firm's TDS liability on other payments. - *Threshold limit*: There is no threshold limit for TDS on partner's remuneration. - *Quarterly TDS returns*: The partnership firm must file quarterly TDS returns (Form 26Q) to report the TDS deducted on partner's remuneration.

It would really help if you give succinct and correct replies to the queries here. Long but irrelevant responses do not help anyone. 

Rachit, as of now no TDS section applies to payments made to the partners. However, starting 1 April 2025, section 194T of the Income-tax Act shall apply. 

TDS on Partner Remuneration - New TDS section as per Income Tax Act 2025

• Old Section - 194T
• New Section - 393(3) [Table: Sl. No. 7]    
• Nature of Payment - Any sum in the nature of salary, remuneration, commission, bonus or interest paid to a partner of the firm or credited to his account (including capital account).

Section 194T applies to remuneration, salary, bonus, commission, and interest credited or paid to a partner where the aggregate to that partner crosses Rs 20,000 in a financial year. The TDS rate is 10%, or 20% if the partner has not furnished PAN. One thing many firms miss: Form 15G and 15H cannot be used to avoid deduction under 194T. The only legitimate route to a lower or nil deduction is a Section 197 certificate from the income tax officer. For the full compliance picture including challan deposit, Form 26Q reporting, and how to handle partners with nil tax liability, this [Section 194T TDS guide for partnership firms](https://taxgarden.in/blog/tds-on-partner-payments-section-194t-firm-llp-guide-india) covers each requirement from April 1, 2025.

Yes, interest paid to a partner on capital is explicitly covered under Section 194T from April 1, 2025.

Section 194T covers: salary, remuneration, commission, bonus, and interest (whether on capital or on loan). The word interest here is broad and includes interest on capital account, not just loans from partners.

Compliance steps for FY 2025-26:

1. Check if aggregate payments to the partner (all categories combined) exceed Rs 20,000 in the year.
2. If yes, deduct 10% TDS. Deposit by 7th of the following month.
3. Obtain TAN for the firm if not already done.
4. File Form 24Q quarterly. Issue Form 16A to the partner.

Mistake to avoid: computing the Rs 20,000 threshold separately for each category (salary vs interest). The limit is aggregate across all payments to that partner.

For a complete compliance checklist for partnership firms and LLPs, read our [Section 194T guide with worked examples](https://taxgarden.in/blog/section-194t-tds-partner-payments-firm-llp-india).

Yes. A partnership firm’s obligation to deduct tax on partner remuneration is determined separately from its TDS obligations for other payees. Under section 194T, the firm must deduct TDS at 10% on salary, remuneration, commission, bonus or interest credited or paid to a partner when the aggregate exceeds ₹20,000 in the financial year. This applies even if the firm does not otherwise deduct TDS.

TDS is deducted at the time of credit to the partner’s account—including a capital account—or payment, whichever is earlier. Section 194T applies from 1 April 2025; for earlier periods, it does not apply. Partner drawings or profit share are not covered merely because they are paid to a partner.

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