Income Tax

TDS on Partner’s Remuneration introduced in the Budget 2024

CA Adityavikram Banka

TDS on Partner’s Remuneration introduced in the Budget 2024:

Introduction:
1. Budget 2024 proposes a deduction of TDS @ 10% on payment by a partnership firm or a LLP to their partners, which may be in form of Salary or remuneration or commission or bonus or interest, when the aggregate amount exceeds Rs. 20,000 in a financial year.

2. Relevant Section for the same is Sec 194T.

Provisions:
1. Payments covered for TDS purpose in form of Salary Remuneration Commission Bonus Interest TDS is applicable only when the aggregate amount in a financial year exceeds Rs. 20,000.

2. Applicable rate of TDS is 10% TDS shall be deducted at the time of payment of credit, whichever is earlier.

3. The provision of this section 194T shall be applicable from 1st April, 2025.

4. Salary to partner does not mean salary covered under section 192 of the Income Tax Act. Hence TDS under 192 shall not be deducted in this case.

Challenges:
1. For the fixed remuneration the calculation is easy, however where the remuneration is decided in the end (at the time of closure of books) based upon the profitability, it will be a bit complex task.

2. It also draws the additional compliance needs and possible liquidity challenges for firms and their partners.

3. It requires firms to prepare by setting effective systems and processes, getting TAN, and ensuring timely TDS deductions and deposits.

CA Adityavikram Banka
Latest posts by CA Adityavikram Banka (see all)