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194T TDS on Partners Remuneration
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....94T TDS on Partners Remuneration<br> Query (Issue) Started By: - Ethirajan Parthasarathy Dated:- 2-5-2026 Last Reply Date:- 4-5-2026 Income Tax<br>Got 3 Replies<br>Income Tax<br>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 t....
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....hat 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.. Reply By YAGAY andSUN: The Reply: At the outset, the premise requires correction. Section 194T of the Inc....
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....ome-tax Act, 1961 mandates TDS on any sum paid by a firm to its partner by way of salary, remuneration, commission, bonus or interest. The obligation to deduct tax is on the amount credited or paid, i.e. Rs. 3,00,000 in the present case, irrespective of allowability under Section 40(b). Section 28(v) provides that any interest, salary, bonus, commission or remuneration received by a partner fro....
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....m the firm shall be chargeable to tax under the head "Profits and gains of business or profession." Notably, the provision does not restrict taxation in the hands of the partner to the amount allowable under Section 40(b). Section 40(b) operates only as a limitation on deduction in the hands of the firm. Disallowance of Rs. 1,00,000 (i.e., excess over Rs. 2,00,000) results in augmentation of th....
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....e firm's taxable income; it does not alter the character or quantum of receipt in the hands of the partner. Judicial position has consistently upheld that remuneration, even if disallowed u/s 40(b), remains taxable in full in the hands of the partner u/s 28(v). There is no statutory linkage restricting partner's taxation to the firm's allowable deduction. Accordingly, in the give....
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....n facts: • The firm shall deduct TDS u/s 194T on Rs. 3,00,000. • The partner is liable to offer the entire Rs. 3,00,000 to tax u/s 28(v). • The TDS credit shall be available against the partner's total tax liability as per Section 199. Hence, offering only Rs. 2,00,000 in the partner's return is not legally tenable. Reply By Ryan Vaz: The Reply....
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....: Yes, there will be a mismatch. • Firm must deduct TDS on Rs. 3,00,000 (actual payment) u/s 194T. • Partner is taxable only on Rs. 2,00,000 (allowed u/s 40(b)) u/s 28(v). The partner can still claim full TDS credit on Rs. 3,00,000, and the excess TDS will result in a refund when filing the return. Reply By Ethirajan Parthasarathy: The Reply: Disclosing only 2,00....
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....,000/- as income against 3,00,000/- for which TDS is done is bound to trigger query or even scrutiny. To avoid this, my doubt is whether we can reflect one lakh as exempt income under proviso to section 28(v) (IT Act 1961) & section 26(2) of IT Act 2025<br> Discussion Forum - Knowledge Sharing ....