CLARITY ON APPLICABILITY OF SECTION 194T FOR AY 2025-26, Income Tax

[Kush Kalra]

Section 194T for TDS on remuneration/ interest paid to partners of partnership firm/LLP introduced by budget 2024 is applicable from 1st April 2025. So is this provision applicable for payments made for ay 2025-26.

Posts / Replies

[DR.MARIAPPAN GOVINDARAJAN]

In my view no. Since this is coming effect from 01.04.2025 it will be applicable for Financial year 2025-26 and for the AY 2026-27.

[deepak gulati]

It is applicable from 1.4.2024, as whenever in any amendment it is mentioned 1.4, it is of AY. Since it is applicable from 1.4.2025 it is for AY 2025-26 corresponding to FY 2024-25.

[Eshaan Singal]

TDS being a procedural section, any amendment in such sections will be applicable from FY only. So 01/04/2025, is FY 2025-26 i.e. AY 2026-27.

Additional:

Here's a scenario to ponder 🤔 upon:

TDS will be done in PY, whereas Partner remuneration as per 40(b) will be known in AY only. Imagine a situation where TDS has been done on salary of INR 8L but salary allowable as per 40(b) is only INR 5L.

The firm will take a hit and disallow INR 3L. The partners will offer an Income of INR 5L. But how will the partners claim TDS credit on INR 3L which won't be offered as an income in the hands of the partners.

Now what can be done in this situation?

[Eshaan Singal]

As per S. 1(2) of FINANCE (NO. 2) ACT, 2024:

"Save as otherwise provided in this Act,—

(a) sections 2 to 87 shall be deemed to have come into force on the 1st day of April, 2024;"

And as per S. 62 "After section 194S of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2025, namely:—

194T".

S.62 overrides S.1(2). Therefore, it is applicable from FY 2025-26.

[jwala narasimheswar mangipudi]

The TDS challan for Section 194T i.e., 94T is not yet updated and uploaded.  Hence the view of the Department seems like the applicable FY would be 2025-26 and not FY 204-25