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 under section 194T raises a mismatch between firm deduction limits and partner taxability.
Section 194T was discussed in relation to remuneration paid by a firm to a partner where the actual payment exceeds the amount allowable under section 40(b). One view stated that TDS must be deducted on the full amount paid and that section 40(b) only limits deduction in the firm's hands, while section 28(v) taxes the partner on the full receipt with TDS credit available under section 199. A contrary view raised the issue of mismatch and queried whether the excess could be treated as exempt income.