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..

[KALLESHAMURTHY MURTHY K.N.]

Sir,

On your filing of Returns based on actual receipts, any excess TDS deduction will be refunded.

AI Summary

Partner remuneration TDS under section 194T may exceed taxable income, with excess tax refundable on return filing.
TDS under section 194T is stated to apply to remuneration paid to partners, even where the firm's deduction is restricted under section 40(b). The discussion highlights a case where a firm pays 3 lakhs annually, but only 2 lakhs is allowable in the firm's hands, and raises the issue of reporting when TDS is deducted on the higher amount. The response says the partner may file the return on actual taxable receipts, and any excess TDS would be refunded through the return process.