I. Increase in Limit of Remuneration to Working Partners

·         Current Limits:

On the first ₹ 3,00,000 of book profit or in case of a loss: ₹ 1,50,000 or 90% of the book profit, whichever is higher.

On the balance of the book profit: 60% of the book profit.

·         Proposed Limits (Effective from April 1, 2025):

On the first ₹ 6,00,000 of book profit or in case of a loss: ₹ 3,00,000 or 90% of the book profit, whichever is higher.

On the balance of the book profit: 60% of the book profit.

II. Introduction of Section 194T – TDS on Payments to Partners

Currently, there is no requirement for deduction of tax at source (TDS) on payments such as salary, remuneration, interest, bonus, or commission made by an LLP to its partners.

However, the Finance Bill, 2024, introduces Section 194T, bringing these payments under the TDS regime.

Key Provisions of Section 194T:

·         TDS Requirement: LLPs must deduct income tax at the rate of 10% on payments made in the form of salary, remuneration, commission, bonus, or interest to partners.

·         Timing of Deduction: The deduction must occur at the time of crediting the amount to the partner’s account (including the capital account) or at the time of payment, whichever is earlier.

·         Threshold for TDS: TDS is applicable if the total amount credited or paid to a partner in a financial year exceeds ₹ 20,000.

Effective Date: The amendment will be effective from April 1, 2025 (Assessment Year 2025-26 onwards), unlike some other TDS provisions which are effective from October 1, 2024.

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