Maximizing Partner Remuneration: TDS Changes for FY 2024-25

Partner’s Remuneration and TDS Calculator for FY 2024-25 AY 2025-26

Changes in Remuneration Limits for Partners

As per Section 40(b), starting from Assessment Year (AY) 2025-26, partnership firms will benefit from an increased limit on the allowability of remuneration for working partners. The updated provisions allow for:

• On the first Rs 6 lakh of book profits, the maximum permissible remuneration is:
  • Rs 3 lakh, or
  • 90% of book profits (whichever is higher).

It is essential for firms to amend their partnership deeds to accommodate this adjustment.

New TDS Requirement Under Section 194T

Additionally, with the insertion of TDS Section 194T, partnerships must now adhere to new compliance regulations. Specifically:

• If the total remuneration, bonus, interest, commission, or salary (excluding profits) paid to a partner exceeds Rs 20,000 within a financial year, the partnership firm is required to deduct TDS at the rate of 10%.

This shift in tax provisions emphasizes the need for firms to maintain accurate records and ensure timely deduction of TDS to avoid penalties.

Conclusion

The financial implications of these modifications are significant for partnership firms, as they must revise their financial strategies and documentation accordingly. By understanding and implementing these changes, firms can optimize their remuneration structures and comply with the latest tax regulations.