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 online

Aashok Kumar Sharma online

(Expert)
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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**.

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### 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.).

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### 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)**.

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### 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 |

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### 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.

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

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