TDS for LLPs: Rates on Payments to an LLP and TDS on Partners (2026)
Short answer: For income tax, an LLP is a firm, not a company. So when a client deducts TDS from a payment to an LLP, the LLP is a non-company deductee, and on contract payments the rate is 2% (the 1% rate is only for individuals and HUFs). An LLP must also deduct TDS on its own payments, including 10% on salary, remuneration, commission, bonus or interest paid to partners above ₹20,000 a year. From 1 April 2026 these rules are in section 393 of the Income-tax Act, 2025, which replaced the old sections such as 194C, 194J and 194T.
Which law applies
The Income-tax Act, 2025 came into force on 1 April 2026. Payments made or credited from tax year 2026-27 (1 April 2026 onwards) follow it. Amounts paid or credited up to 31 March 2026 stayed under the Income-tax Act, 1961. The rates below are from section 393 of the 2025 Act, as published on the Income Tax Department's website; the old section is given for reference.
TDS on payments made to an LLP
| Payment to the LLP | Rate | Threshold | 2025 Act (old 1961 section) |
|---|---|---|---|
| Contract work (including supply of labour) | 2% (an LLP is not an individual or HUF) | ₹30,000 for a single sum, or ₹1,00,000 in aggregate in the tax year | Section 393(1), Table Sl. No. 6(i) (old 194C) |
| Fees for professional services | 10% | ₹50,000 | Section 393(1), Table Sl. No. 6(iii) (old 194J) |
| Fees for technical services (not professional services) | 2% | ₹50,000 | Section 393(1), Table Sl. No. 6(iii) (old 194J) |
| Rent for land, building or furniture | 10% | ₹50,000 for a month or part of a month | Section 393(1), Table Sl. No. 2(ii) (old 194-I) |
| Rent for plant, machinery or equipment | 2% | ₹50,000 for a month or part of a month | Section 393(1), Table Sl. No. 2(ii) (old 194-I) |
These rates apply when the payer is a business covered by these rows of section 393 (column C names it a "designated person" or "specified person"). Individuals and HUFs outside those categories follow separate rows with their own rates and thresholds.
Is an LLP a company deductee? No. In the TDS statement, the payer reports an LLP as a non-company deductee, because it is a firm under the income-tax law, not a company. The TDS deducted shows against the LLP's PAN, and the LLP claims credit for it in its own income-tax return. See income tax for LLPs.
TDS an LLP must deduct
- Payments to its own partners. A firm, which includes an LLP, must deduct 10% on any sum in the nature of salary, remuneration, commission, bonus or interest paid to a partner or credited to their account, including the capital account. The tax is due at the time of credit or payment, whichever is earlier. There is no deduction if the total for that partner in the year does not exceed ₹20,000. This is section 393(3), Table Sl. No. 7 of the 2025 Act (old section 194T, in force from 1 April 2025). A partner's share of profit is not in this list. See partner remuneration and its limits.
- Payments to others. An LLP deducts TDS like any other business when it pays contractors, professionals, rent, commission and so on above the thresholds, at the rates in the table above.
- TAN. An LLP that has to deduct tax needs a Tax Deduction and Collection Account Number (TAN), and must deposit the tax and file TDS statements on time.
Common mistakes
- Deducting 1% instead of 2% on a contract payment to an LLP, by treating it like a proprietor.
- Reporting the LLP as a company deductee in the TDS statement.
- Missing TDS on interest on capital credited to partners at year end; credit to the capital account counts.
- Quoting old section numbers (194C, 194J, 194T) for payments made on or after 1 April 2026.
Frequently asked questions
Is an LLP a company deductee for TDS?
No. An LLP is a firm for income tax, so it is reported as a non-company deductee.
What is the TDS rate on contract payments to an LLP?
2%. The 1% rate applies only where the contractor is an individual or HUF. The threshold is ₹30,000 for a single payment or ₹1,00,000 in aggregate in the tax year.
Does an LLP have to deduct TDS on partners' remuneration and interest?
Yes, at 10%, once the total of salary, remuneration, commission, bonus or interest to a partner exceeds ₹20,000 in the year. From 1 April 2026 this is section 393(3) (Table Sl. No. 7) of the Income-tax Act, 2025; before that it was section 194T.
Is TDS deducted on a partner's share of profit?
No. The partner-payment TDS covers salary, remuneration, commission, bonus and interest. Share of profit is not in that list.
What replaced section 194C and 194J?
For payments from 1 April 2026, section 393 of the Income-tax Act, 2025. Contract payments are Table Sl. No. 6(i) and professional or technical fees are Table Sl. No. 6(iii) of section 393(1).
Starting a new LLP? We handle LLP registration in Ahmedabad and LLP registration anywhere in Gujarat, fully online on the MCA portal. Start with the documents required for LLP registration.