Introduction:
Budget 2024 inserted a new provision in the Act stating that certain payments made to a partner by a firm shall be liable for TDS deduction in accordance with the provisions of Section 194T.
The Following topics cover under section 194T for better understanding
- Type of Payments covered in section 194T
- Rate of deduction of TDS and the limit applicable
- When is the TDS deducted under section 194T
- Applicability of the provisions of Section 194T
- Practical Implication of Section 194T
Type of Payments covered in section 194T
Payments by a firm to a partner that are covered in Section 194T are as under:
- Salary
- Remuneration
- Commission
- Bonus or
- Interest on any account (It can be on a loan account or on a capital account)
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Rate of deduction of TDS and the limit applicable
The rate at which TDS is to be deducted is 10%. The TDS is to be deducted only in the cases where the aggregate payments to a partner exceeds Rs. 20,000 in a financial year.
The provisions of Section 194T shall be made applicable from 1st April, 2025
When is the TDS deducted under section 194T ?
The TDS is to be deducted at earlier of the following dates:
- Credit of sum/payment to the account of partner in the books of the firm or
- Payment to the partner
Note: Credit to the partner’s capital account will also be considered for determining the date in (1) above.
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