M K ANWAR & CO., Chartered Accountants

Partnership firms, do take note of the following two amendments to the Income Tax Act, 1961, that may affect you from April 1, 2025:

1. Enhanced Limits for Partners' Remuneration (Section 40(b)):

The permissible limits for deducting partners' remuneration has been increased.
For the first ₹6,00,000 of book profit or in case of a loss: The deductible amount is now ₹3,00,000 or 90% of the book profit, whichever is higher.
For the balance of the book profit: The deductible amount remains at 60%.

2. Introduction of Tax Deduction at Source (TDS) on Partners' Remuneration (Section 194T):

As per the new Section 194T partnership firms must deduct TDS at a rate of 10% on any sum paid to partners in the form of salary, remuneration, commission, bonus, or interest, provided the aggregate amount exceeds ₹20,000 in a financial year.

Important GST Update
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The Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 09/2024 – Central Tax (Rate) on October 8, 2024. It introduced a new rule under the Reverse Charge Mechanism (RCM) for renting commercial property.

Key Points:
1. When an unregistered person rents out commercial property to a registered person, the GST @ 18% must now be paid by the registered person (the tenant) under RCM.
2. The rule is effective from October 10, 2024.
3. Under RCM, the responsibility to pay GST shifts from the landlord (unregistered person) to the tenant (registered person).
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Example:

• Scenario:
o Landlord Ravi, who is not registered under GST, rents out a shop to M/s ABC, which is registered under GST.
o The monthly rent is ₹10,000.

• What happens now?
o Under the new rule, M/s ABC must calculate and pay the GST (18% of ₹10,000 = ₹1,800) directly to the government under RCM.
o If M/s ABC is under regular scheme of GST, it can claim ITC of the RCM paid. But if it is under composition scheme, it cannot claim ITC.