TDS on Payment to an NRI Partner

Remuneration paid to an NRI partner in a firm follows the non-resident Section 393(2) framework (not the resident partner-remuneration code), while the profit share itself isn't separately subject to TDS.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

20% (remuneration, as FTS-equivalent) — profit share not separately TDS-able

Section & code

Section 393(2), Sl. No. 17, Code 1057

Forms typically needed:

Form 15CA Form 15CB if above threshold

Two distinct payment streams to a partner, treated differently

A partnership firm typically pays its partners in two conceptually distinct ways: remuneration/salary for services rendered to the firm, and a share of profits reflecting their capital/partnership interest. For a resident partner, remuneration is subject to TDS under the domestic partner-remuneration code (Code 393·1067 under the current framework), while the profit share itself is specifically not subject to TDS in the firm's hands, since it's already taxed at the firm level and exempt in the partner's hands to avoid double taxation.

For an NRI partner, this same conceptual split applies, but the remuneration component moves out of the domestic partner-remuneration code entirely and into the general non-resident Section 393(2) framework — since that domestic code is specific to resident payees.

How NRI partner remuneration is actually classified

Remuneration paid to an NRI partner for services rendered to the firm is generally treated similarly to Fees for Technical Services or a comparable classification for services rendered by a non-resident, attracting the 20% domestic Section 393(2) rate absent a lower DTAA rate — a materially different treatment from the resident partner-remuneration framework's rate and threshold structure.

Profit share: not separately taxed, but confirm the firm's own status

The profit share paid to an NRI partner follows the same underlying principle as for a resident partner — not separately subject to TDS, since the firm has already borne tax on its total income. This holds regardless of the partner's residential status. However, if the partnership itself has cross-border elements (foreign partners collectively holding a controlling interest, or the firm's place of effective management being questioned), broader residency and PE considerations for the firm itself may arise — a separate and more complex question from the individual partner's remuneration TDS treatment.

Practical implications for firms with NRI partners

Separate remuneration payments from profit-share distributions clearly in the firm's accounting — they have different TDS treatment.
Apply Section 393(2) (not the domestic partner code) to remuneration paid to any partner who is non-resident for the relevant year.
Confirm each partner's residential status annually, since an NRI partner's status can change if they return to India.
Don't apply TDS to profit-share distributions regardless of partner residency.

Worked example

An NRI partner receiving both remuneration and profit share

A CA firm has an NRI partner based in Singapore who receives ₹8,00,000 annual remuneration for advisory work performed for the firm, plus a profit share of ₹15,00,000 reflecting their partnership interest. The remuneration is classified under Section 393(2) (as a services-equivalent payment), attracting 20% TDS (₹1,60,000) absent DTAA documentation — with Form 15CA/15CB required. The ₹15,00,000 profit share is not separately subject to TDS, following the same principle that applies to resident partners' profit shares.

Common mistakes & litigation traps

Applying the domestic partner-remuneration rate to an NRI partner

The resident partner-remuneration code doesn't extend to non-resident partners — remuneration paid to an NRI partner requires the Section 393(2) framework instead.

Mistakenly deducting TDS on profit-share distributions

Profit share isn't separately subject to TDS for either resident or NRI partners — conflating it with remuneration risks incorrect over-deduction.

Not tracking a partner's residential status changes year to year

A partner's status can shift between resident and non-resident across financial years — reassess before applying the same framework used the prior year automatically.