Section 194T TDS Threshold Calculator for Partners (FY 2025–26)

What is Section 194T?

Section 194T is a newly introduced Tax Deducted at Source (TDS) provision under the Income Tax Act that applies to partnership firms and Limited Liability Partnerships (LLPs) starting from April 1, 2025 (FY 2025–26). This rule requires these entities to deduct TDS when making payments to their partners for salary, remuneration, commission, bonus, or interest.

In simple terms, if your partnership firm or LLP pays its partners an aggregate amount exceeding ₹20,000 in a financial year, you must deduct and deposit 10% TDS with the income tax department. This is a compliance requirement that helps the government track partner income and ensure proper tax collection.

The Section 194T TDS threshold calculator for partners is a free tool designed to help you instantly determine whether TDS applies to your partner payments and calculate the exact TDS amount and net payable amount based on official Income Tax Act provisions.

Why Section 194T Was Introduced (FY 2025–26 Update)

The introduction of Section 194T in FY 2025–26 reflects the government's focus on strengthening tax compliance in the partnership sector. Partnership firms and LLPs are common business structures in India, and many operate with significant partner payments that were previously not subject to uniform TDS rules.

By introducing this provision effective from April 1, 2025, the government aims to:

• Ensure transparent tracking of partner income across all partnership structures
• Reduce tax evasion through timely TDS collection at source
• Streamline compliance for professional firms (CA firms, law firms, consulting firms)
• Create a uniform standard for partner remuneration TDS rule FY 2025–26 across the country
• Enable better coordination between tax authorities and business entities

This means partnership firms and LLPs must now monitor their partner payment records carefully throughout the financial year to avoid penalties and interest for non-compliance. The updated rules make it mandatory for all covered entities to implement Section 194T TDS provisions.

Payments Covered Under Section 194T

Understanding which payments fall under Section 194T TDS on partner payments is critical for accurate compliance. It's important to know that covered payments must all be added together to determine the ₹20,000 threshold. Not every payment a partner receives is covered—for example, profit share distributions are not included.

The five payments covered under Section 194T are:

• Salary: Fixed monthly or periodic salary paid to working partners
• Remuneration: Any form of regular compensation, allowance, or professional fees
• Bonus: One-time or periodic bonus payments to partners for performance or special occasions
• Commission: Commission earned based on business generation or performance metrics
• Interest: Interest paid on partner capital, current account, or loans to partners

All these payments must be aggregated together when checking if they exceed the ₹20,000 threshold. Even if you make small payments in each category, the cumulative total determines TDS applicability. This is where most firms make mistakes—they forget to add up all payment types throughout the year. Use our Section 194T TDS threshold calculator for partners to avoid these errors and ensure accurate aggregation.

₹20,000 Threshold Rule Explained

The ₹20,000 threshold under Section 194T is the key trigger for TDS applicability. Understanding this threshold correctly is crucial for compliance planning and avoiding unintended violations.

The rule is straightforward: If the aggregate of all covered payments to a partner in a financial year is ₹20,000 or less, no TDS is required. The moment it exceeds ₹20,000, TDS becomes mandatory on the full amount.

Here are important points about the threshold to remember:

• The threshold is calculated per partner, not for the firm as a whole
• It applies to the entire financial year (April 1 to March 31)
• All covered payments throughout the year must be combined in aggregate
• Once the threshold is crossed, TDS applies to the entire aggregate amount, not just the excess
• The threshold amount has no exemptions—there's no grace period or partial exemption
• Each partner's threshold is independent—a multi-partner firm calculates per partner basis

For example, if Partner A receives ₹22,000 in total covered payments during a financial year, TDS of ₹2,200 (10%) applies to the full ₹22,000, not just the ₹2,000 excess over the ₹20,000 threshold. This is how partnership firm partner salary TDS works under the new rules.

TDS Rate Under Section 194T

The TDS rate under Section 194T is a fixed 10%. This is straightforward—there are no sliding scales, reduced rates, or exceptions based on partner status, firm size, or residency.

Simple calculation formula: TDS Amount = Aggregate Covered Payments × 10%

Let's use a practical example. If Partner C receives ₹50,000 in total covered payments across all five categories:

The firm must deduct this ₹5,000 at the time of payment or credit (whichever is earlier) and deposit it with the government within prescribed timelines (typically by the 7th of the following month). The partner receives ₹45,000 in hand after TDS deduction.

How the Section 194T TDS Threshold Calculator for Partners Works

The Section 194T TDS threshold calculator for partners is engineered to make compliance simple and error-free. You don't need to remember complex formulas or perform manual calculations—simply enter your partner payment data and get instant, accurate results based on official Income Tax Act rules.

Step-by-step inputs you need to provide:

• Salary Paid to Partner (₹): Total salary for the financial year (April to March)
• Remuneration Paid (₹): Total remuneration and professional fees amount
• Bonus Paid (₹): Bonus amount(s) credited or paid during the year
• Commission Paid (₹): Total commission earned by the partner
• Interest Paid to Partner (₹): Interest on capital, current account, or loans

You can enter any combination of these fields. Leave fields blank if no payment was made in that category. All inputs default to zero for simplicity.

Outputs you receive instantly:

• Total Aggregate Payments: Sum of all covered payments entered
• TDS Applicable?: Yes or No badge (clearly indicates threshold status)
• TDS Amount @10%: Exact TDS to be deducted if applicable (₹0 if not)
• Net Amount Payable After TDS: What the partner actually receives in hand
• Payment Breakdown Table: Clear detailed breakdown of each payment type

The calculator processes all your data instantly in your browser using official Income Tax calculations. No information is stored, logged, or shared—your data remains completely private and secure.

Practical Examples: How to Calculate TDS Under Section 194T

Let's work through three realistic scenarios to show how how to calculate TDS under Section 194T works in practice:

Common Mistakes Partnership Firms Should Avoid

Partnership firms often make errors when implementing Section 194T TDS rules. Learning from common pitfalls is key to smooth TDS deduction for partnership firms compliance:

• Ignoring cumulative payments across the year: Many firms track payments month-by-month but forget to check the yearly aggregate total. They might deduct TDS in one month and not the next, even though the threshold is crossed on a yearly basis. Always maintain a running total throughout the year.
• Not deducting TDS once the threshold is crossed: Some firms incorrectly think TDS applies only to amounts exceeding ₹20,000. The rule requires TDS on the entire aggregate amount once the threshold is exceeded, not just the excess. This is a critical compliance error that leads to penalties.
• Confusing profit share with remuneration: Profit share or capital appreciation is NOT covered under Section 194T. Only salary, remuneration, commission, bonus, and interest are covered. Including non-covered payments in your calculation will lead to incorrect results and compliance issues.
• Not maintaining partner payment records: Without clear documentation of all payments, you cannot accurately report TDS in your returns or defend your position during tax audits. Keep invoices, payment vouchers, salary slips, and calculation sheets for every TDS deduction.
• Forgetting about TDS deposit timelines: Even if you deduct TDS correctly, failing to deposit it within the prescribed period (typically by the 7th of the following month) results in penalties and interest charges. Set calendar reminders for TDS deposits.
• Not filing TDS returns: TDS deduction for partnership firms must be reported in quarterly or annual TDS returns (Form 26Q or 26QA). Many firms deduct TDS but forget to file returns, leading to automatic penalties.

FAQs on Section 194T

Final Summary: Take Control of Your Section 194T Compliance

Section 194T is a critical compliance requirement for partnership firms and LLPs from FY 2025–26 onwards. Understanding the ₹20,000 threshold, the 10% TDS rate, and which payments are covered is essential for avoiding penalties and maintaining smooth operations.

The good news? Compliance is straightforward with proper planning and the right tools. By using the Section 194T TDS threshold calculator for partners, you can:

• Instantly check TDS applicability for your partner payments each financial year
• Calculate exact TDS amounts and net payable amounts with precision
• Plan partner compensation structures to optimize tax positions
• Maintain accurate records for audit defense and compliance proof
• Ensure timely TDS deposit and quarterly/annual return filing
• Avoid penalties, interest, and tax department scrutiny

Ready to check your Section 194T compliance? Use the calculator above to enter your partner payment data and get instant clarity on your TDS obligations under Section 194T.