New Delhi, April 3 -- In the July 2024 Union budget, a new category was added to an already humongous list of payments that attract tax deduction at source, or TDS: the payment of salary, remuneration, bonus, commission, and interest by a partnership firm to its partners.

This applies to payments or credits exceeding Rs.20,000 on or after 1 April 2025, attracting TDS at 10%. This Rs.20,000 is a combined limit for both interest and remuneration (including bonus, commission and salary). No TDS is required from the share of profits credited or paid to a partner.

Under general law, a partnership firm is not a legal entity separate from its partners-it is a group of partners. However, under income tax laws, a partnership firm is a taxable en...