Section 194T mandates that any salary, bonus, commission, interest, or remuneration paid to a partner of a firm will be subject to TDS at a rate of 10% if the aggregate amount for the relevant financial year exceeds Rs. 20,000. This new provision covers all firms, regardless of their size or applicability of audit.
To comply with Section 194T, firms must:
Obtain TAN if it hadn’t obtained the same yet: Firms must obtain a Tax Deduction and Collection Account Number (TAN) if they do not already have one.
Deduct TDS: Ensure that TDS is deducted at the rate of 10% on payments exceeding the Rs. 20,000 threshold, from April 2025 i.e. date of applicability of this section
Deposit TDS: Deposit the deducted TDS to the government within the stipulated time frame, and in correct manner to avoid any fees or penalties
File TDS Returns: File quarterly TDS returns detailing the deductions and payments made, which increased the burden on small firms as I discussed earlier
Issue TDS Certificates: Issue TDS certificates (Form 16A) to the partners, providing them with proof of the tax deducted.