194T TDS on Partners Remuneration

[Ethirajan Parthasarathy]

As per section 194T, TDS is to be done on remuneration paid to a partners. A partnership firm pays fixed salary of 3 lakhs p.a. But as per section 40(b) allowable salary is 2 lakh.

As per section 28(v), its very clear that partner will be taxed only on 2 lakhs which is the deduction allowed in the hands of the firm.. But the firm has to mandatorily deduct tax on 3 lakh u/s 194T. In the above situation, how the partner can offer income 2 lakh as per section 28(v) while TDS is done on 3 lakh. Plz clarify..

AI Summary

Partner remuneration TDS mismatch under section 194T raises reporting issues where deducted tax exceeds taxable income. TDS on partner remuneration under section 194T may be required on the full amount paid by the firm, even where the deduction allowable to the firm is restricted under section 40(b). The issue is how the partner should offer income when tax is deducted on a higher remuneration amount, while taxable income is stated to follow the amount admissible in the firm's hands under section 28(v).