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TDS on Partners' Remuneration and Interest (Section 194T)

From 1 April 2025, a partnership firm or LLP deducts 10% TDS on salary, remuneration, commission, bonus and interest paid or credited to a partner, once the total for that partner crosses ₹20,000 in the year. Partners' share of profit and capital withdrawals are not covered.

Quick answer (FY 2025-26 and FY 2026-27)

TDS rate
10%
Threshold
₹20,000 per partner per year

TDS on partners' remuneration: rate chart

Payment Section (1961 Act) New section (2025 Act) Rate Threshold
Salary, remuneration, commission, bonus or interest to a partner 194T 393(3), Sl. No. 7 10% ₹20,000 a year
Share of profit of the firm - - No TDS -

What 194T covers

Section 194T was introduced from 1 April 2025. Before that, firms paid partners without TDS. The ₹20,000 limit is the total of all covered payments to a partner during the year; once crossed, TDS is on the full amount.

Share of profit is exempt in the partner's hands, and drawings out of capital are not income, so neither attracts TDS. Interest on capital is covered.

When to deduct and the new section

TDS is deducted at the time of credit to the partner's account, including the capital account, or payment, whichever is earlier. Year-end credits of remuneration and interest made while finalising accounts therefore attract TDS in March.

From 1 April 2026 the provision is in Section 393(3), Table Sl. No. 7 of the Income-tax Act, 2025, with the same rate and limit.

TDS on partners' remuneration calculator

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Frequently Asked Questions

What is the TDS rate on partners' remuneration?
10% under Section 194T, from 1 April 2025.
What is the threshold for TDS under 194T?
₹20,000 of salary, remuneration, commission, bonus and interest to a partner in the year.
Is TDS deducted on a partner's share of profit?
No. Share of profit is exempt for the partner and is not covered by 194T.
Is interest on capital to partners covered by 194T?
Yes. Interest on capital credited to a partner is part of the ₹20,000 limit and attracts 10% TDS.
Does 194T apply to LLPs?
Yes. It applies to partnership firms and LLPs alike.
What is the new section for 194T?
From 1 April 2026 it is Section 393(3), Table Sl. No. 7 of the Income-tax Act, 2025.
What is the due date for depositing TDS on partners' remuneration?
By the 7th of the following month. For tax deducted in March, the due date is 30 April. Tax deducted under 194-IB by individual tenants is paid with Form 26QC within 30 days from the end of the month of deduction.
What happens if TDS on partners' remuneration is not deducted or deposited on time?
Interest is charged at 1% a month (or part of a month) from the date TDS was deductible until it is deducted, and 1.5% a month from deduction until deposit. Late filing fees, penalties and disallowance of the expense can also apply.
Which TDS return and certificate apply to TDS on partners' remuneration?
Deductors with a TAN file a quarterly return in Form 26Q (Form 27Q for payments to non-residents) and issue Form 16A to the payee each quarter. Individual tenants under 194-IB use Form 26QC and issue Form 16C.
How can the payee check the TDS deducted?
In Form 26AS and the Annual Information Statement (AIS) on the income tax portal. The TDS is then claimed as a credit against tax in the income tax return, and any excess is refunded.
Did the Income-tax Act 2025 change TDS rates from April 2026?
No. From 1 April 2026 the new Act renumbered the provisions (TDS is mainly in Sections 392 and 393), but the rates and thresholds carried over. Returns and challans for payments from that date use the new section references.

New section references are to the Income-tax Act, 2025, in force from 1 April 2026. Verify the table serial number against the official text before quoting it in a return or notice reply.

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