Tds on payment of professional services to an llc in usa

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Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2014 Indian company has to make payment of $2623 = Approx Rs. 150000 of professional fees to a lawyer LLC in USA for consultancy on legal matter. What is the TDS to be deucted, if any. If not the pls specify why with sections or DTAA article No.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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14 March 2014 @ 10% u/s 195 tds needs to be deducted.

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2014 How 10% - request you to pls clarify. I was thinking 40% as it is a foreigm company to whom profeesional consultancy charges are being paid.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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14 March 2014 sec 195 says it that tds rate is 10% and 40% is the income tax rate to eb paid by foriegn co.

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2014 Request anybody else to pls check & respond. Read section 195 - it nowhere mentions 10%

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 Great question! Let me clarify the TDS on payment of professional services to an LLC in the USA:

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### 1. **Section 195 and TDS on Payments to Non-Residents**

* **Section 195** governs TDS on payments to non-residents, including foreign companies or entities like an LLC.
* The **rate of TDS depends on the nature of the income** and the provisions of the Income Tax Act or any applicable **Double Taxation Avoidance Agreement (DTAA)** between India and the USA.

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### 2. **Rate of TDS on Professional Fees**

* Under **Section 194J**, TDS on fees for professional services is generally **10%**.

* However, **payments to non-residents** are covered by **Section 195** which mandates TDS at the rate specified in the Act or DTAA, whichever is more beneficial.

* The **basic rate without considering DTAA can be as high as 40%** (plus surcharge and cess) on such income for non-resident companies or entities.

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### 3. **DTAA Between India and USA**

* The India-USA DTAA usually **limits the tax rate on fees for technical or professional services to 10%**.
* This means, if the payment is categorized under professional or technical fees, the TDS rate will be 10%, not 40%.

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### 4. **Applicability to LLC**

* An LLC (Limited Liability Company) is treated as a **company or an entity depending on its tax classification in the USA**.
* Assuming it is treated as a company, payment for professional/legal consultancy services attracts TDS under **Section 195** at the **DTAA rate of 10%**.

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### 5. **Summary**

| Description | Section | TDS Rate without DTAA | TDS Rate with DTAA (India-USA) |
| -------------------------------- | ----------- | --------------------- | ------------------------------ |
| Professional Fees paid to US LLC | Section 195 | Up to 40% | 10% |

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### 6. **Additional Points**

* You must deduct TDS at the **DTAA rate (10%)** unless a lower rate certificate or nil deduction certificate is obtained.
* The LLC should provide a **Tax Residency Certificate (TRC)** from the USA tax authorities.
* You need to file **Form 15CA and 15CB** for remittance compliance.
* The LLC can claim credit for TDS in the USA to avoid double taxation.

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If you want, I can help draft the TDS calculation and compliance steps for this payment. Would you like that?

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