CLARITY ON APPLICABILITY OF SECTION 194T FOR AY 2025-26

[Kush Kalra]

Section 194T for TDS on remuneration/ interest paid to partners of partnership firm/LLP introduced by budget 2024 is applicable from 1st April 2025. So is this provision applicable for payments made for ay 2025-26.

[DR.MARIAPPAN GOVINDARAJAN]

In my view no. Since this is coming effect from 01.04.2025 it will be applicable for Financial year 2025-26 and for the AY 2026-27.

[deepak gulati]

It is applicable from 1.4.2024, as whenever in any amendment it is mentioned 1.4, it is of AY. Since it is applicable from 1.4.2025 it is for AY 2025-26 corresponding to FY 2024-25.

[Eshaan Singal]

TDS being a procedural section, any amendment in such sections will be applicable from FY only. So 01/04/2025, is FY 2025-26 i.e. AY 2026-27.

Additional:

Here's a scenario to ponder 🤔 upon:

TDS will be done in PY, whereas Partner remuneration as per 40(b) will be known in AY only. Imagine a situation where TDS has been done on salary of INR 8L but salary allowable as per 40(b) is only INR 5L.

The firm will take a hit and disallow INR 3L. The partners will offer an Income of INR 5L. But how will the partners claim TDS credit on INR 3L which won't be offered as an income in the hands of the partners.

Now what can be done in this situation?

[SURESH LAKSHMIKUMARAN]

A simple solution is to file a revised tds return for quarter 4 of the financial year, deleting the tds on remuneration of Rs 3 lakhs. The tds paid would be available for use in the next financial year. So pay less tds in the next financial year and file tds returns accordingly.

[Eshaan Singal]

As per S. 1(2) of FINANCE (NO. 2) ACT, 2024:

"Save as otherwise provided in this Act,—

(a) sections 2 to 87 shall be deemed to have come into force on the 1st day of April, 2024;"

And as per S. 62 "After section 194S of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2025, namely:—

194T".

S.62 overrides S.1(2). Therefore, it is applicable from FY 2025-26.

The TDS challan for Section 194T i.e., 94T is not yet updated and uploaded.  Hence the view of the Department seems like the applicable FY would be 2025-26 and not FY 204-25

AI Summary

Applicability of Section 194T: effective from the financial year beginning 1 April 2025, affecting the subsequent assessment year.
The debate concerns commencement of Section 194T (TDS on partner remuneration/interest) and whether an express commencement of 1 April 2025 makes the provision applicable to the financial year beginning that date. Contributors conclude the section-specific commencement controls over any general deemed commencement rule, so the provision governs the financial year starting 1 April 2025 and the corresponding assessment year. The discussion also flags a timing mismatch between TDS deduction and allowability of partner remuneration, and notes practical responses including delayed challan code availability and revising the fourth-quarter TDS return to correct excess deductions.