Decoding Section 194T of the Income Tax Act, 1961: Effective from April 1, 2025

The introduction of Section 194T in the Income Tax Act, 1961, effective April 1, 2025, mandates Tax Deducted at Source (TDS) on payments made by partnership firms and LLPs to their partners.

Scope and Key Provisions

Section 194T applies to:

• Salary, Remuneration, Commission, Bonus, and Interest on Capital Contributions
• Excludes Capital Repayment or Partner Withdrawals

TDS Rate and Threshold

• Rate: 10%
• Threshold: Payments exceeding ₹20,000 per financial year

TDS must be deducted at the earlier of credit to the partner’s account or actual payment.

Impact and Compliance

• Firms must update records, obtain TAN, deduct and deposit TDS, and file returns.
• Partners will receive payments post-TDS and can claim credit while filing ITRs.

Ensuring Compliance

Firms should assess payments, implement TDS deductions, maintain records, and educate partners. Early preparation is crucial for a smooth transition under this new tax rule.

For detailed guidance, Corporate Genie – Your professional business and tax advisors are here to assist you with any queries. Connect with a Corporate Genie Expert at +91-8700202997 or visit our website www.corporategenie.in.