Section 194T establishes a new framework for TDS on payments made by firms to their partners. The provisions of Section 194T are scheduled to take effect from April 1, 2025. Under this provision, any payment made to a partner—whether it is salary, bonus, commission, interest, or remuneration—will be subject to a TDS

Revised Limits for Partner Remuneration:

First ₹6,00,000 of Book Profit or Loss: The maximum deductible remuneration is ₹3,00,000 or 90% of the book profit, whichever is higher.

On Balance of Book Profit: Deduction is allowed at 60% of the book profit.

Key Provisions of Section 194T

Applicability
Applies to payments made to partners of a firm, including salary, bonus, commission, interest, and remuneration.

Threshold Limit
TDS is applicable only if the aggregate amount paid to a partner in a financial year exceeds ₹20,000.

Rate of TDS
The applicable TDS rate is 10%.

Timing of TDS Deduction
Section 194T specifies that TDS should be deducted at the earlier of the following two events:

At the Time of Credit: When the sum is credited to the partner’s account, including capital accounts.
At the Time of Payment: When the payment is made to the partner, whether through cash, cheque, draft, or other modes.

This approach ensures timely TDS deductions, reducing the risk of tax evasion and delays in tax payments.