TDS U/S. 194-T i.e. Payments to Partners

Section 194T mandates that any salary, bonus, commission, interest, or remuneration paid to a partner of a firm will be subject to TDS at a rate of 10% if the aggregate amount for the relevant financial year exceeds Rs. 20,000. This new provision covers all firms, regardless of their size or applicability of audit.

To comply with Section 194T, firms must:

Obtain TAN if it hadn’t obtained the same yet: Firms must obtain a Tax Deduction and Collection Account Number (TAN) if they do not already have one.

 Deduct TDS: Ensure that TDS is deducted at the rate of 10% on payments exceeding the Rs. 20,000 threshold, from April 2025 i.e. date of applicability of this section

Deposit TDS: Deposit the deducted TDS to the government within the stipulated time frame, and in correct manner to avoid any fees or penalties

File TDS Returns: File quarterly TDS returns detailing the deductions and payments made, which increased the burden on small firms as I discussed earlier

Issue TDS Certificates: Issue TDS certificates (Form 16A) to the partners, providing them with proof of the tax deducted.

Thanks for your valuable reply.

Thanks, sir.

You are welcome.                           

Sir,

If a partner withdraw capital from firm, will TDS be appliable on withdrawal of capital. 

Withdrawal from his capital account will not attract TDS. But, any remuneration or interest credited to his capital account will attract TDS.

Hi,

Section 194-T is applicable from Assessment Year 2025-26 or 2026-27 ?

Thanks & Regards

From FY 2025-26.....

I.e. Assessment year 2026-27....

Thanks, sir ji.

With regards

You are welcome.             

Section 194T is catching many firms off guard this year since it is the first full year it applies. The Rs 20,000 threshold is per partner per year across all categories combined (salary, interest, commission, and bonus), TDS is 10%, and you deduct at the time of credit or payment whichever comes first. The fact that a partner's final tax liability works out to nil does not remove the firm's obligation to deduct at source.

The employer-side payroll and salary compliance obligations for FY 2026-27 that run alongside 194T are covered in this [payroll compliance guide for FY 2026-27](https://taxgarden.in/blog/payroll-changes-labor-law).