Calculate Section 194T TDS on partner salary, bonus, commission & interest instantly. Covers the ₹20,000 threshold and 10% rate.
Free Section 194T TDS calculator for partnership firms & LLPs. Instantly check TDS on partner salary, commission, bonus & interest against the ₹20,000 threshold — 10% with PAN, 20% without. Get the exact TDS amount and partner's net payout in seconds.
Free Section 194T TDS calculator for Indian partnership firms and LLPs. Check TDS on partner salary, bonus, commission and interest using our Section 194T TDS threshold calculator, and see how the ₹20,000 threshold and 10% rate actually work in practice.
Section 194T is a TDS provision introduced by the Finance Act, 2024. It requires partnership firms and LLPs to deduct 10% TDS on specified payments to partners, including salary, remuneration, commission, bonus and interest, once the total for a partner crosses ₹20,000 in a financial year. It's effective from 1 April 2025, and it's the first time partner remuneration has entered India's TDS system at all.
If you run a partnership firm or an LLP, here's the change that will quietly show up in your month-end routine: Section 194T now requires TDS on certain payments to partners. Not profits, payments like remuneration, salary, commission, bonus and interest.
The headline rule is simple:
You must deduct TDS at 10% on covered payments to a partner once the total for that partner crosses ₹20,000 in the financial year.
Understanding the rule isn't the hard part. Applying it without disrupting partner cash flow, keeping it reconciled with Section 40(b) allowability, and hitting quarterly filing deadlines, that's where firms actually struggle.
For years, partner remuneration and partner interest sat in a strange TDS-free zone. Partners reported this income themselves and paid tax through advance instalments or self-assessment. That's gone now. This income has moved into the mandatory withholding framework, so your firm is responsible for collecting and depositing the tax upfront, not the partner later.
Section 194T doesn't create a new tax. It just changes when the tax gets collected and who's on the hook for compliance.
Firms moving onto this rule usually end up tightening three things:
The legal basis is Finance Act, 2024, Clause 62, formally brought in through CBDT Notification No. 22/2025 dated 27 March 2025, which updated Forms 26Q and 27Q to carry Section 194T reporting.
Section 194T applies to:
Here's where a lot of small firm owners get it wrong: "our turnover is under ₹1 crore, so this doesn't apply to us." That logic doesn't hold up. There's no turnover or audit threshold in Section 194T. Even a three-partner consulting firm paying ₹30,000 a year to each partner has to comply.
For firm classification questions, the Income Tax Department's official site is the source to check.
TDS applies to payments to a partner that amount to:
The law uses the phrase "in the nature of," which means substance beats labeling. If a payment functions like remuneration or interest, calling it a "special allowance" won't survive scrutiny in an audit. If interest is part of what a partner receives, running it through an interest income tax calculator shows the personal-tax side of that same payment.
These stay outside Section 194T:
A rough rule of thumb: if a payment is recurring, contractual, or tied to how the partnership performs, it's probably covered. If it's a one-off return of what the partner already invested, it usually isn't. Before finalizing remuneration, it's worth checking your numbers against Section 40(b) allowable limits so this doesn't turn into a mismatch later.
| Partner's PAN Status | TDS Rate | Notes |
|---|---|---|
| Valid PAN provided | 10% | Standard rate |
| PAN not provided | 20% | Section 206AA penalty rate |
| Non-resident partner | 10% + surcharge + cess | Treaty implications may apply |
Verify partner PANs early with a PAN validation tool so you don't end up defaulting to the 20% rate by mistake.
This is where firms slip. The threshold isn't per payment and isn't per payment head. It's an aggregate figure.
Once a partner's combined covered payments (salary plus commission plus bonus plus interest) cross ₹20,000 in the financial year, TDS applies on the entire amount. Not just the portion above ₹20,000.
Here's how that plays out over a year:
If your accounting team deducts TDS only on the "₹3,000 excess" over ₹20,000, that return will get flagged as wrong in a TDS audit. It's a genuinely common mistake, and an easy one to make if nobody's tracking the running total.
Section 194T follows an "earlier of" rule. TDS must be deducted at whichever comes first:
That dual trigger means a journal entry alone is enough to create the TDS obligation. No cash needs to move.
This trips a lot of firms up: many finalize partner remuneration in May or June, then post a journal entry dated "as of 31 March." The date that matters for TDS timing isn't the backdate, it's when the entry actually gets posted in the ledger. Post a March entry in June, and your TDS obligation (plus any interest exposure) runs from June, not March.
Firms that plan payouts early and post entries promptly are the ones who avoid late-deduction interest under Section 201(1A).
Most firms overthink this. It's a four-step process.
Total = Salary + Commission + Bonus + Interest on Capital (all heads combined)
If Total ≤ ₹20,000 → No TDS required
If Total > ₹20,000 → TDS applies (see Step 3)
Valid PAN → 10%
No PAN → 20% (Section 206AA)
TDS Amount = Total Covered Payments × Applicable Rate
Deposit by the 7th of the following month, or 30th April for March deductions.
Say an LLP credits the following to one working partner during FY 2025-26:
| Payment Component | Amount |
|---|---|
| Monthly salary (₹10,000 × 12) | ₹1,20,000 |
| Commission | ₹30,000 |
| Interest on capital (quarterly) | ₹25,000 |
| Year-end bonus | ₹10,000 |
| Total covered | ₹1,85,000 |
Threshold check: ₹1,85,000 is well over ₹20,000, so TDS applies.
TDS = ₹1,85,000 × 10% = ₹18,500
Partner's net receipt = ₹1,85,000 − ₹18,500 = ₹1,66,500
That ₹18,500 shows up in the partner's Form 26AS/AIS on the tax portal, and the partner claims it as credit when filing their ITR. To see how this stacks up against actual tax liability, an old vs new regime comparison is worth running.
This comes up a lot in partner forums, and the answer points to a real gap that existed in the law for decades.
Section 192 (TDS on salaries) applies to employees only. Partners aren't employees under tax law, so partner "salary" never fell under this section.
Section 194A (TDS on interest) covers interest earned by individuals, savings accounts, fixed deposits and so on. Partner interest was excluded by design; it had its own separate treatment.
Section 194T is the new bridge. It specifically covers partner remuneration, commission, bonus and interest, closing a gap that had existed since the Act was drafted in 1961 without anticipating a formal partner TDS regime. It brings all of it under one withholding framework.
April → 7th May
May → 7th June
June → 7th July
July → 7th August
August → 7th September
September → 7th October
October → 7th November
November → 7th December
December → 7th January
January → 7th February
February → 7th March
March → 30th April (special extended date)
Deposit through Challan ITNS 281.
| Quarter | Period | Form 26Q Due |
|---|---|---|
| Q1 | April - June 2025 | 31 July 2025 |
| Q2 | July - September 2025 | 31 October 2025 |
| Q3 | October - December 2025 | 31 January 2026 |
| Q4 | January - March 2026 | 31 May 2026 |
Non-resident partner payments use Form 27Q, with the same due dates.
Issue Form 16A to each partner within 15 days of the quarterly Form 26Q due date.
If a partner comes back saying "my TDS isn't showing in Form 26AS," it's almost always because the return was filed late or has an error somewhere. File 26Q on time and accurately, and the credit shows up on the portal without any drama.
TDS defaults stack up quickly.
| Violation | Penalty / Interest | Legal Basis |
|---|---|---|
| Failure to deduct TDS | Interest @ 1% per month until deducted | Section 201(1A) |
| Failure to deposit after deduction | Interest @ 1.5% per month until deposited | Section 201(1A) |
| Late TDS return filing | ₹200 per day until filed (capped) | Section 234E |
| Non-deduction of TDS | Penalty up to 100% of TDS amount | Section 271C |
| Wilful non-deposit | Prosecution, up to 7 years imprisonment | Section 276B |
| Expense disallowance | 30% of uncovered payment disallowed as business expense | Section 40(a)(ia) |
The one that hurts most is the Section 40(a)(ia) disallowance. Pay ₹5 lakhs in partner remuneration without deducting TDS, and the department adds back ₹1.5 lakhs to your taxable income. That's on top of interest and penalties, and it multiplies your tax bill in a way people don't expect until they see the notice.
Wrong: firm pays ₹25,000 total and deducts TDS on just ₹5,000, the difference over the threshold.
Why it fails: the law requires TDS on the full ₹25,000 once the threshold is crossed, not just the surplus.
Correct approach:
Total = ₹25,000 > ₹20,000 threshold
TDS = ₹25,000 × 10% = ₹2,500 (not ₹500)
Wrong: "we credited ₹50,000 to the partner's capital account but didn't deduct TDS since no cash moved."
Why it fails: Section 194T triggers on credit. A journal entry is enough on its own; no cash movement needed.
Correct approach: deduct TDS the moment the credit entry is posted, whether or not cash follows.
Wrong: "our turnover is ₹80 lakhs and we're not under Section 44AB audit, so this doesn't apply to us."
Why it fails: Section 194T has no turnover or audit threshold. Every firm has to comply.
Correct approach: check partner payment totals, not firm turnover.
Wrong: tracking salary separately (₹15,000/month), assuming it's below threshold, and forgetting to add commission (₹5,000/month), bonus (₹2,000) and interest (₹3,000).
Why it fails: the law aggregates all covered heads together. Total comes to ₹25,000, crossing the threshold.
Correct approach: keep one running log with every payment head added together, updated as each entry is posted, not reconstructed later.
Wrong: books close in July, and the partners' March remuneration entry gets posted then.
Why it fails: March TDS has to be deposited by 30th April. Posting late pushes the interest liability from the May 7 deadline onward.
Correct approach: finalize partner payouts before 30 April so deposits stay on time.
Wrong: the deed just says "partners shall receive remuneration as mutually agreed."
Why it fails: vague terms invite disputes with tax authorities over Section 40(b) allowability, and raise questions about how much TDS should actually apply.
Correct approach: update the deed with precise remuneration terms and limits, checked against Section 40(b) before finalizing anything.
A partner used to receiving ₹2 lakhs a year now gets ₹1.8 lakhs, after 10% TDS of ₹20,000 is deducted. Running the new number through a salary tax calculator is a quick way to see the real take-home difference. That means:
If a partner's overall tax liability works out below 10%, say their total income falls in the nil or 5% slab, the TDS deducted ends up higher than what they actually owe. They still need to file an ITR to claim that back. Skipping the return just because TDS was already deducted is the wrong move; it just delays getting your own money back.
If a partner ends up needing to top up their own advance tax later in the year, a Section 234A/234B/234C interest calculator shows what any shortfall could cost in interest.
This is probably the messiest scenario firms run into:
The fix is to file a revised Form 26Q for Q4 to correct the over-deduction. The excess TDS can then be adjusted against future TDS liabilities, or refunded to the firm with approval from the department.
This is exactly why it's worth calculating allowable remuneration before finalizing payments, rather than after the books are closed.
A little bit of process discipline saves a lot of pain later. At minimum, keep:
₹20,000 per partner per financial year, aggregated across salary, commission, bonus and interest. Once it's crossed, TDS applies to the entire amount, not just the excess.
10% with a valid PAN. 20% if PAN isn't available, under Section 206AA. Non-residents add applicable surcharge and cess.
1 April 2025, applicable from FY 2025-26 (AY 2026-27) onward. Payments made before 31 March 2025 don't carry any TDS obligation under this section.
Yes. The definition of "firm" here covers both traditional partnership firms and LLPs, so LLPs are fully in scope.
It stays exempt. Pure profit distributions remain outside Section 194T, protected separately under Section 10(2A). This section only touches remuneration, commission, bonus and interest.
It does. TDS triggers at the earlier of credit or payment, so a journal entry crediting the partner's account is enough on its own, no cash movement needed.
Yes, through the normal return process. File the ITR and claim the TDS credit; a refund follows if the TDS deducted turns out higher than the final liability.
Yes. The obligation is tied to payments credited or paid to partners, not to whether the firm turned a profit. A loss-making firm that still pays partner salary or interest still has to deduct TDS on it.
It depends on what that partner actually receives, not on the sleeping-versus-working label. A sleeping partner who only takes a profit share stays outside Section 194T, since profit share is exempt under Section 10(2A). If the same partner also receives interest on capital above the threshold, TDS applies to that interest.
Calculations verified by our team including CA Anita Patil. View our full accuracy policy and meet the team →
For informational purposes only. Results are estimates based on the inputs you provide and the rules in effect for the period shown, and are not tax, legal or financial advice. Verify figures against the relevant official source and consult a qualified professional before acting on them. Accuracy & limitations
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