CA Pratibha Goyal | Jul 23, 2024 |
Budget 2024 introduces TDS on Salary to Partner: Changes made in Remuneration Limit of Working Partner
The Union Budget of 2024 has introduced a major change in the Taxation of remuneration to working partners of a firm. It has also introduced Tax Deducted at source (TDS) on salary, remuneration, interest, bonus or commission by partnership firm to partners.
There is a limit in the Income Tax Act, up to which we can give remuneration to the working partner of the firm. It has been proposed to increase these limits in Budget 2024.
| Limits applicable upto assessment year 2024-2025 | |
| (a) on the first Rs. 3,00,000 of the book profit or in case of a loss | Rs. 1,50,000 or at the rate of 90% of the book profit, whichever is more; |
| (b) on the balance of the book profit | at the rate of 60%: |
| Revised Limits applicable from assessment year 2025-2026 and subsequent years | |
| (a) on the first Rs. 6,00,000 of the book profit or in case of a loss | Rs. 3,00,000 or at the rate of 90% of the book profit, whichever is more; |
| (b) on the balance of the book profit | at the rate of 60%: |
A new TDS section 194T may be inserted to bring payments such as salary, remuneration, commission, bonus and interest to any account (including capital account) of the partner of the firm under the purview of TDS
Applicability: TDS has to be deducted if the aggregate amount/amounts is more than Rs. 20,000 in the financial year.
Rate of TDS: The applicable TDS rate will be 10%.
The provisions of section 194T of the Act will take effect from the 1st day of April 2025.
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