mohammad rasool baig
(Management Consultant)
(1026 Points)
Replied 15 February 2016
The requirement to deduct TDS, of course, applies to LLP carrying on business or profession if the turnover or gross receipts of the business or profession exceeded the limits applicable for tax audit in the earlier year.
So i think in your it may not be applicable as last year there is no business in the earlier year and the question of turnover will not arise.
Lakshmi
(Article)
(171 Points)
Replied 15 February 2016
Will your answer change if it is tds on salary to designated partner because LLP has to deduct tds on salary as designate partners's income are more than exemption limit?
Prateek
(Partner)
(143 Points)
Replied 15 February 2016
Question of tax audit applicable or not in previous year arises only in case of Individual or HUF. In case of LLP, Company TDS is to be deducted from the very first day irrespective of turnover.
Vinayak Hegde
(CA)
(154 Points)
Replied 15 February 2016
Section 194H which deals with TDS on commision is as follows
Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of [ten] per cent.
Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed [five thousand rupees]
So only Individual and HUF are excempt from TDS. (Any person, not being an individual or a Hindu undivided family) LLP is not covered in the list. So TDS should be deducted.
CA GOKUL RAJ R
(Chartered Accountant)
(151 Points)
Replied 15 February 2016
Hi Lakshmi,
For Individual and HUF only, the mandatory of tax audit to deduct tds. other than those, all the person is liable to deduct tax as per the relevant tds charging sections.
For your next question, until now there is a big ambiguity that whether firm is liable to deduct tax on Salary paid to partners or not. If so, under which section the firm has to deduct tax either u/s 192B or u/s 194J.
There is no relationship of employer and employee between the firm and partner respectively. hence no tds to be deducted u/s 192B.
But in accounting purpose, the firm shall claim exemption of salary to partners as per Sec 40b of income tax act.
The partner's salary shall be treated as business income to the partners hand. So the tds is to be deducted u/s 194J only. But i dont know that whether the partners are professionals as per section 194J.
I am of the opinion that in case of LLP, the designated partner's salary is subject to tds u/s 194J
Thanks
CA Gokul Raj
Ashish Bansal
(CA)
(1036 Points)
Replied 15 February 2016
As far as Deduction of Tax to Partner salary is concerned, it is not deductable.
Reason- Partner Remuneration is not taxable under the Head 'Income from Salaries' but it is taxable as 'Businee / Professional Income'. Therefore provisions of Section 192B shall not apply. Moreover, Partner is taxable only to the extent firm is claiming deduction u/s 40(b).
Its been in practise for so many years, no tds was deducted from partners' remuneration and no additions/ disallowance / penalty has ever been imposed by income tax department so far in my personal knowledge.
CAclubindia
