For the first time in Indian tax history, TDS applies inside a partnership firm. From 1 April 2025, new Section 194T requires every firm and LLP to deduct 10% TDS on certain payments to its own partners — a big change many firms are still adjusting to.
What's covered
TDS at 10% applies on salary, remuneration, commission, bonus and interest (on capital or loan) paid or credited to a partner. It does not apply to capital withdrawals (drawings) or a partner's share of profit.
The threshold
If total such payments to a partner exceed ₹20,000 in a financial year, TDS applies — and importantly, on the entire amount, not just the part above ₹20,000. TDS is deducted at credit or payment, whichever is earlier.
What your firm must do
- Obtain a TAN if you don't have one.
- Deduct 10% on covered partner payments crossing the threshold.
- Deposit the TDS by the due date and file quarterly returns (Form 26Q).
- Issue Form 16A to partners.
A practical tip
Firms often finalise partner remuneration only at year-end — but TDS may need to be deducted the moment it's credited on 31 March. Plan your books and deposits so you don't miss the deadline. Note that partners can't use Form 15G/15H to avoid this deduction.
Section 194T is now a routine part of running a firm. Set up TAN, factor it into partner payouts, and file quarterly — or let us handle the whole cycle for you.
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This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.
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