[Opinion] Section 194T | Tedious Challenges Before Firms for TDS
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- 2 Min Read
- By Taxmann
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- Last Updated on 28 January, 2025
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Dr. Rakesh Gupta & Adv (CA) Somil Agarwal – [2025] 170 taxmann.com 704 (Article)
Government’s quest to bring more and more payments within the TDS net seems to have prompted section 194T to come on the statute by the Finance (No. 2) Act, 2024 w.e.f. 01.04.2025. Section 194T reads as under:
Payments to partners of firms.
194T. (1) Any person, being a firm, responsible for paying any sum in the nature of salary, remuneration, commission, bonus or interest to a partner of the firm, shall, at the time of credit of such sum to the account of the partner (including the capital account) or at the time of payment thereof, whichever is earlier shall, deduct income-tax thereon at the rate of ten per cent.
(2) No deduction shall be made under sub-section (1) where such sum or the aggregate of such sums credited or paid or likely to be credited or paid to the partner of the firm does not exceed twenty thousand rupees during the financial year.
Salient features of section 194T
- Obligation to deduct tax u/s 194T is on the firm which would include LLP also in view of the definition of ‘firm’ given in section 2(23) of the Income Tax Act, 1961.
- Tax is to be deducted at the rate of 10% on the amount of salary, remuneration, commission, bonus or interest paid to a partner of the firm.
- Tax is to be deducted at the time of credit of such sum to the account of the partner or at the time of payment thereof, whichever is earlier.
- No tax is required to be deducted where amount of salary etc. paid to the partner of the firm does not exceed Rs. 20,000/- during the financial year. However, tax would be required to be deducted in case the aggregate of salary, remuneration, interest etc. paid or credited to a partner during the year exceeds a sum of Rs. 20,000/-
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