Hi janagan
I would use half the yield stress for the shaft in torsion as the failure stress.
A shaft in torsion is subject to shear stress and using the
maximum shear theory which can be found in any strength of materials book states elastic failure occurs when the maximum shear stress becomes 1/2 yield stress.
so if you put a safety factor on this figure and say use 40%
of half the yield stress and calculate the stress in the shaft using the formula :-
shear stress = T*D/2*j
where T = torque
D = shaft dia
j = polar moment of inertia
hope this helps
regards desertfox