TDS filing for a partnership firm is mandatory once the firm's gross receipts exceed ₹1 crore (business) or ₹50 lakh (profession) in the preceding financial year. Partnership firms must deduct tax at source on salary, rent, professional fees, contractor payments, and interest, then deposit it by the 7th of the following month and file quarterly returns. Taxocity helps partnership firms stay 100% TDS-compliant — from registration to every quarterly return — backed by real human experts and more than three decades of experience.

• Quarterly TDS returns (Form 24Q, 26Q) are due 31 days after each quarter-end.
• Late deposit attracts interest at 1.5% per month; late filing attracts ₹200/day under Section 234E.
• As of April 2026, the Direct Tax Code 2025 governs TDS provisions for the FY 2026-27 assessment cycle.

What is TDS for a Partnership Firm?

Tax Deducted at Source (TDS) is a mechanism under the Direct Tax Code 2025 (previously Income Tax Act 1961) where the payer deducts a percentage of tax before making certain payments. A partnership firm acting as a payer is legally required to deduct TDS, deposit it with the government, and file periodic returns — failing to do so makes the firm a "defaulter in deduction."

Unlike a salaried individual, a partnership firm is not only subject to TDS on income it receives but is also responsible for deducting TDS on payments it makes — salaries to staff, rent, professional fees to consultants, contractor bills, and interest paid to partners or lenders.

Is TDS Applicable to Your Partnership Firm?

TDS applicability for a partnership firm depends on the nature of payments made and the firm's turnover. The mandatory threshold for tax audit (and hence TDS applicability as a payer) is:

• Business: Gross turnover exceeding ₹1 crore in the preceding financial year.
• Profession: Gross receipts exceeding ₹50 lakh in the preceding financial year.

Even below these thresholds, certain payments always attract TDS regardless of the firm's size — for example, rent above ₹50,000 per month (Section 194-IB), salary payments, and payments to contractors above specified limits.

Key TDS Sections for Partnership Firms

The following table summarises the most commonly applicable TDS sections for a partnership firm making payments in FY 2026-27:

Payment Type	Section	TDS Rate (Individual)	TDS Rate (Non-Individual / Firm / Company)	Threshold
Salary to Employees	192	As per slab	As per slab	Above basic exemption
Contractor / Sub-contractor	194C	1%	2%	Single payment > ₹30,000 or aggregate > ₹1 lakh
Professional / Technical Fees	194J	10%	10%	> ₹30,000 per annum
Rent (Land, Building, Furniture)	194-I	10%	10%	> ₹2.4 lakh per annum
Rent by Non-Audit Firms	194-IB	5%	N/A	> ₹50,000 per month
Interest (other than banks)	194A	10%	10%	> ₹5,000 per annum
Commission / Brokerage	194H	5%	5%	> ₹15,000 per annum
Payment to Resident Contractors (e-commerce)	194-O	1%	1%	Any amount

Note: Rates quoted are standard rates without surcharge or cess. If the payee does not furnish a PAN, TDS is deducted at 20% or the applicable rate, whichever is higher.

TDS on Partner's Interest and Salary

This is an area where many partnership firms inadvertently default. Remuneration (salary/bonus) paid to a working partner and interest on partner's capital are deductible expenses for the firm — but they are taxable income in the hands of the partner.

However, under the Direct Tax Code 2025 provisions governing partnership taxation, TDS is not required to be deducted on interest and remuneration paid to partners by the firm, since a partnership and its partners are not treated as separate entities for this purpose. This remains a frequently misunderstood point — if you are uncertain, consult a Taxocity expert before making partner payments.

TDS Due Dates for Partnership Firms (2026-27)

Missing even a single deposit deadline triggers automatic interest. Below are the key TDS compliance dates every partnership firm must track:

Obligation	Due Date
Monthly TDS deposit (April – February)	7th of the following month
TDS deposit for March	30th April
Q1 TDS Return (Apr – Jun) — Form 24Q/26Q	31st July
Q2 TDS Return (Jul – Sep)	31st October
Q3 TDS Return (Oct – Dec)	31st January
Q4 TDS Return (Jan – Mar)	31st May
TDS Certificate (Form 16 / 16A) issuance	15 days from return due date

Which TDS Return Forms Apply?

Partnership firms must file the correct form depending on the nature of the deduction:

• Form 24Q: TDS on salaries paid to employees.
• Form 26Q: TDS on all payments other than salary to residents — contractor fees, rent, professional charges, commission, etc.
• Form 27Q: TDS on payments made to non-residents (applicable when a partnership pays foreign contractors or consultants).
• Form 27EQ: Tax Collected at Source (TCS) — applicable if the firm collects tax on sale of specified goods.

How to File TDS Return for a Partnership Firm (2026)

Step 1: Obtain TAN

A Tax Deduction and Collection Account Number (TAN) is mandatory before deducting any TDS. Apply through Form 49B online via the NSDL portal. The TAN is quoted on all challans and TDS returns.

Step 2: Deduct TDS at Source

At the time of payment or credit to the payee's account (whichever is earlier), deduct the applicable TDS percentage as per the relevant section. Maintain proper deduction records for each vendor, contractor, or employee.

Step 3: Deposit via Challan 281

Deposit the deducted TDS using Challan ITNS 281 on the Income Tax portal or through net banking. Ensure the correct TAN, assessment year, and section code are mentioned — errors here can cause TDS credit mismatches for your payees.

Step 4: Prepare TDS Return Data

Compile all deductee details: PAN, payment amounts, TDS amounts, challan details, and section codes. Use the RPU (Return Preparation Utility) or TRACES-approved software to generate the FVU (File Validation Utility) file.

Step 5: File on TIN-NSDL / TRACES

Upload the validated FVU file on the TIN-NSDL portal. Once accepted, download the provisional receipt (acknowledgement). After processing, download Form 16A from TRACES and issue it to deductees within 15 days of the return due date.

Penalties for TDS Non-Compliance

TDS defaults are costly. The table below shows what a partnership firm risks if it misses deadlines or fails to deduct:

Default	Consequence
Failure to deduct TDS	Interest @ 1% per month from due date to deduction date
Late deposit of TDS after deduction	Interest @ 1.5% per month from deduction date to deposit date
Late filing of TDS return	₹200 per day under Section 234E (subject to TDS amount cap)
Failure to file TDS return	Penalty of ₹10,000 to ₹1,00,000 under Section 271H
Expenses disallowed	30% of payments disallowed as business expenditure if TDS not deducted
Prosecution	Wilful default can lead to prosecution under the Direct Tax Code 2025

The 30% expense disallowance is particularly painful for partnership firms — it increases taxable income directly, leading to a higher tax bill even if the actual TDS amount was small.

Common TDS Mistakes by Partnership Firms

• Wrong PAN of deductee: Causes credit mismatch; the payee cannot claim TDS credit in their return.
• Applying wrong section: E.g., using 194C instead of 194J for technical service payments significantly changes the rate.
• Not deducting on GST component: TDS is deductible only on the base invoice amount — not on GST. Many firms erroneously deduct TDS on the full GST-inclusive invoice.
• Missing lower deduction certificates: If a vendor submits Form 13 (lower/nil deduction certificate), failing to apply the lower rate creates an over-deduction dispute.
• Not updating challan details in the return: Challan BSR code, date, and serial number must match exactly what was deposited.

TDS vs. Advance Tax for a Partnership Firm

Partnership firms often confuse TDS obligations with their own advance tax liability. These are two separate compliances:

• TDS: The firm deducts and deposits tax on payments it makes to others — it is an obligation as a payer.
• Advance Tax: The firm pays tax on its own estimated income in instalments during the year — it is an obligation as a taxpayer.

Both must be handled simultaneously. Read Taxocity's guide on TDS filing for small businesses to understand how TDS credits reduce the firm's final tax payable.

Why Choose Taxocity for TDS Filing?

Taxocity has been helping Indian businesses with end-to-end tax compliance for more than three decades. Here is what sets us apart for partnership firms:

• Dedicated TDS manager: A real human expert handles your TDS calendar, deductions, challan deposits, and return filings — not a bot.
• 100% compliance guarantee: We ensure zero late fees by tracking every due date proactively.
• End-to-end support: From obtaining TAN and setting up the firm's tax profile to filing quarterly returns and issuing Form 16A to your vendors and employees.
• Integrated compliance: Combine TDS filing with GST filing, income tax returns, and other registrations under one roof.
• Trusted by 5,000+ clients: Rated 4.8/5 based on real client reviews across diverse industries.

Whether your firm is newly registered or scaling rapidly, Taxocity provides the compliance backbone so you focus on running the business. Also explore our resources on partnership firm registration and LLP vs partnership firm if you are evaluating your business structure.

Key Takeaways

1. Partnership firms must deduct TDS on payments like salary, rent, contractor fees, and professional charges once audit thresholds are crossed.
2. TDS must be deposited by the 7th of the following month (30th April for March).
3. Quarterly returns (Form 24Q/26Q) are due on 31st July, 31st October, 31st January, and 31st May.
4. Late deposit attracts 1.5% per month interest; late filing attracts ₹200 per day under Section 234E.
5. Failure to deduct TDS results in 30% disallowance of that expenditure — directly increasing taxable profit.
6. TDS is not deducted on partner remuneration/interest paid by the firm to its partners.
7. As of FY 2026-27, the Direct Tax Code 2025 governs all TDS provisions.

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Disclaimer: The information provided in this article is for general informational purposes only and does not constitute tax advice. Tax laws and regulations are subject to change. Partnership firms should consult a qualified tax advisor or a Taxocity compliance expert before taking any action based on this content.