TDS on Partner Payments 2026: Section 393 vs Old 194T
TDS on salary, remuneration, commission, bonus or interest paid or credited by a firm to a partner continues in TY 2026-27 under Section 393 of the Income-tax Act, 2025. The familiar old provision is Section 194T, which first became effective on 1 April 2025.
TDS transition check — 22 September 2026: The Income Tax Department confirms that payments or credits on or after 1 April 2026 are governed by the corresponding withholding provisions of the Income-tax Act, 2025 and the relevant section 393 table item should be used in current filings.
Quick answer
- Current reference: Section 393, partner-payment entry.
- Old reference: Section 194T.
- Rate: 10%.
- Threshold: aggregate covered payments exceeding ₹20,000 during the tax year.
- Deduction timing: credit to the partner's account, including capital account, or actual payment, whichever is earlier.
Which partner payments are covered?
The statutory wording covers sums in the nature of salary, remuneration, commission, bonus or interest paid to a partner of the firm or credited to the partner's account, including the capital account. Profit share and genuine capital withdrawal are different items and should not be automatically classified as partner remuneration merely because money moves through a capital account.
Old Section 194T vs Section 393
| Point | Old Section 194T | TY 2026-27 Section 393 |
|---|---|---|
| Effective framework | From 1 April 2025 under the 1961 Act | Income-tax Act, 2025 |
| Covered amounts | Salary, remuneration, commission, bonus, interest | Same categories in the current table |
| Rate | 10% | 10% |
| Threshold | ₹20,000 aggregate | ₹20,000 aggregate |
Correct timing of deduction
TDS is triggered at the earlier of credit or payment. A credit to the partner's capital account is expressly relevant. The effective date matters: a credit on 31 March 2025 was before Section 194T commenced, whereas a qualifying credit on or after 1 April 2025 falls within the new partner-payment TDS framework, subject to the statutory conditions.
Example
ABC & Co. credits ₹1,20,000 remuneration and ₹30,000 interest to Partner A during TY 2026-27. Aggregate covered payments are ₹1,50,000, which exceeds ₹20,000. TDS at 10% must be considered at the relevant credit/payment points under Section 393.
Section 393 does not decide deductibility of remuneration
TDS compliance and deduction of partner remuneration in computing the firm's taxable business income are separate questions. A payment may be subject to TDS but still need to satisfy the separate partnership-remuneration and interest-deduction limits/conditions under the applicable provisions of the Income-tax Act.
What finance teams should do
- Map every partner ledger separately.
- Identify salary, remuneration, commission, bonus and interest credits.
- Aggregate covered amounts partner-wise.
- Deduct at the earlier of credit or payment once the statutory condition applies.
- Check PAN and other current higher-rate provisions separately.
- Deposit/report TDS under the current TY 2026-27 forms and section mapping.
- Separately test whether the expense is deductible in the firm's tax computation.
Common mistakes
- Applying Section 194T to 31 March 2025 credits even though the provision began on 1 April 2025.
- Ignoring capital-account credits.
- Looking only at remuneration and missing interest/commission/bonus.
- Confusing TDS applicability with tax deductibility under partnership-remuneration rules.
- Treating every capital withdrawal or profit share as a 194T/393 payment without examining its nature.
Official references
Reviewed 19 August 2026. Partner-payment classification and deductibility can be fact-specific; reconcile the partnership deed, books and current tax law.
Frequently Asked Questions
What should I know about Quick answer?
Current reference: Section 393, partner-payment entry. Old reference: Section 194T. Rate: 10%. Threshold: aggregate covered payments exceeding ₹20,000 during the tax year. Deduction timing: credit to the partner's account, including capital account, or actual payment, whichever is earlier.
Which partner payments are covered?
The statutory wording covers sums in the nature of salary, remuneration, commission, bonus or interest paid to a partner of the firm or credited to the partner's account, including the capital account. Profit share and genuine capital withdrawal are different items and should not be automatically classified as partner remuneration merely because money moves through a capital account.
What should I know about Old Section 194T vs Section 393?
Point Old Section 194T TY 2026-27 Section 393 Effective framework From 1 April 2025 under the 1961 Act Income-tax Act, 2025 Covered amounts Salary, remuneration, commission, bonus, interest Same categories in the current table Rate 10% 10% Threshold ₹20,000 aggregate ₹20,000 aggregate
What should I know about Correct timing of deduction?
TDS is triggered at the earlier of credit or payment. A credit to the partner's capital account is expressly relevant. The effective date matters: a credit on 31 March 2025 was before Section 194T commenced , whereas a qualifying credit on or after 1 April 2025 falls within the new partner-payment TDS framework, subject to the statutory conditions.
What should I know about Example?
ABC & Co. credits ₹1,20,000 remuneration and ₹30,000 interest to Partner A during TY 2026-27. Aggregate covered payments are ₹1,50,000, which exceeds ₹20,000. TDS at 10% must be considered at the relevant credit/payment points under Section 393.
What should I know about Section 393 does not decide deductibility of remuneration?
TDS compliance and deduction of partner remuneration in computing the firm's taxable business income are separate questions. A payment may be subject to TDS but still need to satisfy the separate partnership-remuneration and interest-deduction limits/conditions under the applicable provisions of the Income-tax Act.
What should I know about What finance teams should do?
Map every partner ledger separately. Identify salary, remuneration, commission, bonus and interest credits. Aggregate covered amounts partner-wise. Deduct at the earlier of credit or payment once the statutory condition applies. Check PAN and other current higher-rate provisions separately. Deposit/report TDS under the current TY 2026-27 forms and section mapping. Separately test whether the expense is deductible in
What should I know about Common mistakes?
Applying Section 194T to 31 March 2025 credits even though the provision began on 1 April 2025. Ignoring capital-account credits. Looking only at remuneration and missing interest/commission/bonus. Confusing TDS applicability with tax deductibility under partnership-remuneration rules. Treating every capital withdrawal or profit share as a 194T/393 payment without examining its nature.
What should I verify before acting?
Verify the applicable period, eligibility, conditions and latest official source.
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