TDS PARTNERS SALARY

There is no TDS deduction required on a partner's salary or interest on capital under the Income Tax Act. Consequently, the firm does not need to deduct any TDS, regardless of whether the amount is physically paid out or credited to the partner's current account during the finalization of books for FY 2025-26. The partner will pay tax on this income directly through their individual tax return.

Partnership firms and Limited Liability Partnerships (LLPs) must deduct TDS at a flat rate of 10% under Section 194T on payments made to partners, including remuneration, salary, bonus, commission, and interest. This provision is effective for payments made or credited from 1st April 2025 onwards.  TDS applies if the aggregate of all covered payments to a partner exceeds ₹20K in a financial year.

The firm must deduct TDS at the earlier of two events: when the amount is credited to the partner's account (including the capital account) or at the time of actual payment.

Section 194T has been in force since April 1, 2025, so for FY 2025-26 your firm must deduct TDS at 10% on partner salary, remuneration, commission, bonus and interest on capital whenever the aggregate for a partner in the year exceeds Rs 20,000. The deduction timing is the earlier of actual payment or credit to the partner current or capital account, so if you credit the amounts during book finalization, TDS applies at that point itself.

The earlier reply appears to reflect the pre-April 2025 position when no such obligation existed. Our [TDS rate chart for FY 2026-27](https://taxgarden.in/blog/tds-rate-chart-2026-to-2027) covers Section 194T alongside all the new sections with applicable thresholds.