Tds from remuneration to foreign partner of a llp

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 July 2013 Explanation 2 to Section 15 says that "remuneration to a working partners is not coming under the head salaries". Hence section 192 is not applicable. Section 195 deals with other sums paid or payable to non-resident.My question is that if an LLP pays remuneration to its foreign partner for more than 2 lakhs in a year will coming under the purview of Section 195?

Querist : Anonymous

Querist : Anonymous (Querist)

03 July 2013 Pls reply.. thank you..

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

27 July 2025 Great question!

Here’s the key point:

* **Remuneration paid to a working partner (whether resident or non-resident) is NOT considered ‘salary’ under Income Tax Act (Explanation 2 to Section 15).**
* Therefore, **Section 192 (TDS on salary) does NOT apply**.

---

### What about Foreign Partner remuneration?

* When LLP pays remuneration to a **foreign partner (non-resident)**, this payment is treated as **‘other sum’ payable to a non-resident**.
* So, **Section 195** applies here, which mandates TDS on any sum paid to non-residents (subject to tax treaties, etc.).

---

### Threshold & Applicability:

* If the **remuneration exceeds Rs 2 lakhs in a year**, yes, it **falls under Section 195** and LLP is required to deduct TDS on the gross amount payable to the foreign partner.
* The LLP should **deduct TDS at the applicable rate under domestic law or relevant Double Taxation Avoidance Agreement (DTAA)**.

---

### Summary:

| Scenario | Section Applicable | TDS Applicable? |
| -------------------------------- | ------------------------------------------------- | ------------------------------------ |
| Remuneration to resident partner | Section 15 (not salary), no TDS under Section 192 | No TDS under salary provision |
| Remuneration to foreign partner | Section 195 | Yes, TDS must be deducted on payment |

---

### Suggestion:

* LLP should **obtain a Tax Residency Certificate (TRC)** and check **DTAA** provisions to determine the correct TDS rate.
* If treaty benefit applies, LLP can apply for **lower TDS certificate from IT Department** before deducting TDS.

---

If you want, I can help you draft the TDS calculation or advise on filing procedures for this. Let me know!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now