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of <h1>Partnership firms lose deduction for partner payments when failing documentation requirements under Section 185</h1> The Income Tax Bill 2025's Clause 326 and the Income-tax Act 1961's Section 185 address partnership firm taxation when procedural requirements are not met. Both provisions disallow firms from deducting partner payments (salary, interest, commission) when they fail to comply with prescribed documentation and registration requirements. The amounts disallowed to the firm are excluded from partners' taxable income to prevent double taxation. The 2025 Bill maintains the same substantive approach as the 1961 Act, with only structural and referencing updates. These provisions enforce procedural discipline while ensuring fairness in tax computation for both firms and partners.
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