New TDS rules for partnership firms: What you need to know

The new rules for Tax Deducted at Source (TDS) for partnership firms have come into effect from April 1, 2025. You should also be aware of these rules. If you also do business in a partnership firm, then ignoring these rules can prove costly for you.

According to the Income Tax Department, it will now be mandatory for partnership firms and Limited Liability Partnerships (LLPs) to deduct TDS on certain payments to their partners.

this is the new rule

This new rule has been brought under section 94T of the Income Tax Act. Which has become effective from this financial year 2025-26. Know the new rules of TDS in detail –

1. Now the partnership firm will have to deduct TDS on all payments like salary, remuneration, commission, bonus and interest made to the partners. After which it has to be deposited to the government.

2. TDS will be deducted at the rate of 10% on these payments.

3. If the total payment to a partner in a financial year exceeds Rs 20,000, then it will be mandatory to deduct TDS. That is, it is not necessary to deduct TDS on payments less than Rs 20,000.

4. These new rules of TDS will apply to partnership firms and LLPs. Whoever makes any payment to their partners. TDS will be deducted before making the payment and will be deposited with the government. This rule has come into effect from 1 April 2025.

5. TAN is necessary

Partnership firms must have TAN. Firms which do not have TAN will have to apply for it.

This is the aim of the government

The government wants to make tax collection on payments from partnership firms transparent and effective so that cases of tax evasion can be stopped.

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