# Section 194T - TDS on Payment to Partner of Firm

## Scope

TDS on payments by firm to partner in the form of:

Salary
Remuneration
Commission
Bonus
Interest

## Key Parameters

Rate: 10% of the amount paid or credited (including capital account credit)
Threshold: No TDS if aggregate payment is up to ₹20,000
Kaun Katega (Deductor): Firm
Kiska Katega (Deductee): Partner

## Important Note

Amount credited to capital account is also covered. So even if salary/interest is not paid in cash but credited to partner's capital account, TDS applies.

Worked example

### Example 1

Example: A firm credits ₹50,000 as interest on capital to Partner A's capital account on 31st March. No cash is paid. Is TDS applicable?

Answer: Yes. Section 194T covers credit to capital account. Since amount exceeds ₹20,000 threshold, TDS @ 10% on ₹50,000 = ₹5,000 must be deducted by the firm.

⚠️ Common exam mistakes

Skipping TDS when amount is only credited to capital account and not paid in cash
Applying threshold per payment instead of aggregate during PY
Not aggregating different types of payments (salary + interest + bonus) to one partner

Reference: 194T

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