TDS on payments to Partner from 1-4-2025, u/s 194T.

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Manoj Punjabi

Accountant

383 Points Posted on 28 January 2025

TDS on Salary & Interest to Partners from 1-4-2024 – u/s 194T

Query:

As TDS is to be deducted on payments to partners from 1-4-2024, my question is as follows:

The salary of the partner is decided at the end of the year, depending on the firm’s income. Similarly, interest is credited to the partner’s account at the end of the year. However, payments to partners are made on an approximate on-account basis, against salary/interest on capital. How should TDS be deducted in such cases?
Example:

Annual salary = ₹18,00,000
Interest on capital = ₹20,00,000
Total amount the partner can withdraw = ₹38,00,000

However, the partner withdraws only ₹2,00,000 per month on account.

How should TDS be deducted in this scenario?

Should TDS be deducted at 10% on the ₹2,00,000 withdrawn per month, which would be ₹20,000 every month?
Or should it be deducted at the end of the year on the total amount of ₹38,00,000, i.e., 10% ₹3,80,000?

Additionally, if the partner withdraws an amount against the profit share of the previous year, do we need to deduct TDS on that amount? Since the profit share is after income tax payment, should TDS still be applicable?

Please guide.

Replies (3)

Quick Summary

This discussion addresses queries regarding Tax Deducted at Source (TDS) on payments made to partners under Section 194T, effective from April 1, 2025. It clarifies how to handle TDS on salary and interest when these amounts are determined at year-end and paid on an approximate on-account basis throughout the year. The guidance suggests deducting TDS on the remuneration component of monthly drawings and making year-end adjustments. Profit shares are generally excluded from TDS under this section.

NARENDRA

ACCOUNTS MANAGER

2213 Points Posted on 28 January 2025

Tds against salary is not 10% all the time, calculate it AS per income as well as their allowances , deduct exempted income , allowances, apart from salary add other incomes & then calculate over the salary. There are also 2 different regimes , so calculate as per convenient.

Manoj Punjabi

Accountant

383 Points Posted on 30 January 2025

Dear Mr. Narendra

Thank you for your reply, please consider this.

Salary is decided at the end of year depending on profits, so how to calculate TDS without knowing the actual salary.

Interest on capital to be credited at end of the year.

Withdrawals during the year are approximate on account basis against salary, interest & profit share.

Do we have to deduct TDS in case of drawings, withdrawals from capital against profit share of last year which was credited on 31^st march of last year, tax on profit share is already paid by firm.

Please guide.

Other experts please give suggestions.

Tax Garden

Tax Consultant

1645 Points Posted on 18 May 2026

Section 194T applies from April 1, 2025, so FY 2025-26 is the first full year of compliance. The 10% rate kicks in once total payments of salary, remuneration, commission, bonus, or interest to a partner cross Rs 20,000 in the year. Profit share is excluded. Deduction happens at the time of credit to the partner account or actual payment, whichever is earlier, and is reported in Form 26Q. For firms that pay monthly drawings against provisional remuneration, deduct TDS on the remuneration component each month and adjust at year-end when the actual figure is confirmed. The [new TDS payment codes for FY 2026-27](https://taxgarden.in/blog/new-tds-payment-codes-fy-2026-27-india) also covers the updated challan codes for Section 194T deposits so the filing does not flag errors.