TDS - Partner Salary

[Ethirajan Parthasarathy]

Section 194T of Income Tax mandates for TDS @ 10% on Salary etc. paid to a partner.

As per sec.28(v), salary paid to partner is taxed under business head only to the extent of what is allowed as deduction in the hands of partnership firm.

In one practical case, salary paid to partner is 6 lakh while nothing is allowable in the hands of firm since their only source of income is rental income and there is no business income.

If TDS is done, both partner and firm will be paying tax on the same amount.

Request experts to give their views how to go about in the given circumstances

AI Summary

Section 194T Inapplicable: No TDS on Partner Salary as Profit Share; Avoids Double Taxation on Rental Income. A query was raised regarding the application of Section 194T of the Income Tax Act, which mandates a 10% TDS on salaries paid to partners. In a specific scenario, a partner received a salary of 6 lakh, but it is not deductible for the firm as its income is solely from rentals, not business. This could lead to double taxation for both the partner and the firm. An expert responded that since the payment is effectively a profit share, Section 194T does not apply, and thus TDS should not be deducted.