What is TDS

TDS is basically a method of payment of tax to government at the point of credit or payment for transactions of specified nature.

Payments of a specific nature made to Specified Recipient by a person on whom responsibility of TDS deduction is casted is required to deduct tax at the appropriate rates and deposit the deducted sum to the credit of the central government.

A certificate is then issued from the deductor of TDS to the deductee stating the amount of Tax deposited in the name of recipient , on the basis of this certificate , the recipient get credit of such TDS deducted , The same can be verified from 26AS statement of the recipient


Whether TDS is to be deducted from Salary Paid to Partners

TDS is NOT required to be deducted from Partner’s Remuneration. ” No”, that’s the crux of the whole article , but if you want a detailed analysis read on

Why TDS is not required to be deducted on Salary Paid to Partners

Sec 192 , Charging Section

Chargeability of TDS on Salary is governed by section 192 of Income Tax Act. TDS u/s 192 is required to be deducted on payments that are
chargeable under head”Salaries”. Extract of Section 192 is as under


192. (1)Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year.

Employer- Employee Relationship

To charge an income under head “Salaries”, Employer Employee relationship is necessary , which is not present in case of partners.

The statute requires deduction of tax at source from the income under the head salary. As such the existence of employer-employee’ relationship is the 3sine-qua-non’ for taxing a particular receipt under the head salaries. Such a relationship is said to exist when the employee not only works under the direct control and supervision of his employer but also is subject to the right of the employer to control the manner in which he carries out the instructions

So , going by the aforesaid provision , No Employer Employee Relationship exist between a partnership firm and partners.

Profits and gains of business or profession.

Partner’s Remuneration is chargeable as “Profit or Gains of business or Profession” in hands of partner.

Also Income by way of Partner’s Remuneration is specifically covered by section 28

Extract of Section 2 8(v) of Income Tax Act is presented here

28. The following income shall be chargeable to income-tax under the head “Profits and gains of business or profession”,

(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm :

Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;

This Extract Clarifies that Partners Remuneration will be chargeable under head Profits and gains of business or profession‘ and not under head ‘Salaries’.


TDS is not required to be deducted on Partner’s Remuneration- Thus on a combined Reading of Both the sections , it can be concluded that TDS is not required to be deducted from Partner’s Remuneration as the same is not a payment that is Chargeable under head “Salaries”

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

Author Bio

Qualification: CA in Practice
Location: New Delhi, IN
Member Since: 25 Mar 2017 | Total Posts: 5
Being a Practicing Chartered Accountant by his Academic and Professional qualification and also an Entrepreneur by his Experience, CA Vineet Singhal is providing his services in a vast range of Consulting, Management and Finance for businesses, Government Institutions and individuals. His Experience View Full Profile

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January 2021