Question ID : 36958

TDS on Partners Remuneration u/s 195 of a Foreign partner

There is a foreign partner of a resident partnership firm. Whether TDS u/s 195 is required to be deducted while making paying remuneration to him. and whether TDS u/s 195 is required to be deducted in case the profit earned is also paid to that partner. Thanx

Answer ID : 76233

As remuneration from the partnership firm is taxable in the hand of the partner. Hence TDS should be deducted on the same as per the prescribed rate in the DTAA between India and country of tax residency of the nonresident partner. Again the question of Indian PAN comes into picture. If the partner is not having Indian PAN then Section 206AA will also come into picture and TDS may be deducted at the rate of 20% even a lower rate is prescribed in the DTAA. However benefit of the decided case AZADI BACHAO AANDOLAN VS. UOI may be given to the partner and inspite of not having Indian PAN tax can be deducted at the rate prescribed in DTAA. If there is no DTAA then maximum rate will be applied for deduction of tax at source. For taxability of profit also DTAA should be referred and accordingly Tax should be deducted at source.

Answer ID : 76234

As remuneration from the partnership firm is taxable in the hand of the partner. Hence TDS should be deducted on the same as per the prescribed rate in the DTAA between India and country of tax residency of the nonresident partner. Again the question of Indian PAN comes into picture. If the partner is not having Indian PAN then Section 206AA will also come into picture and TDS may be deducted at the rate of 20% even a lower rate is prescribed in the DTAA. However benefit of the decided case AZADI BACHAO AANDOLAN VS. UOI may be given to the partner and inspite of not having Indian PAN tax can be deducted at the rate prescribed in DTAA. If there is no DTAA then maximum rate will be applied for deduction of tax at source. For taxability of profit also DTAA should be referred and accordingly Tax should be deducted at source.

Answer ID : 76243

Tax need to be deducted at 30% under clause, " Payment of Any other Income for which no TDS rate is prescribe then TDS Rate Like Payment of Rent"

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