Direct Tax
TDS on payments to partners: a Section 194T review checklist
How firms and LLPs can organise partner-payment ledgers before applying the current withholding provisions.
Identify every relevant ledger
The review should cover remuneration, salary, commission, bonus and interest credited or paid to partners. Ledger naming alone is not sufficient; the underlying nature and timing of each entry must be examined.
Checklist
- Partnership deed and amendments
- Partner-wise ledger from the beginning of the tax year
- Monthly provision and year-end adjustment entries
- TDS deduction and deposit records
- Reversals, prior-period entries and drawings-account adjustments
Credit entries need attention
A year-end provision or credit to a partner account may create a withholding question even when cash has not yet been transferred. Review the date of credit and payment rather than only the bank statement.
If deduction was missed
Quantify the principal TDS, applicable interest and return-correction implications. Also review the related expenditure allowability and obtain a documented reconciliation before filing or revising statements.