Tds
This query is : Resolved
19 August 2014
Friends,
i) Is tds deductible on payments made to amazon web services USA for cloud computing services.
i) Is tds deductible on payments made to amazon web services USA for cloud computing services.
19 August 2014
it should be conver u./s 195 tds will be deductd @ 10% if have PAN other wise
@ 20%.
@ 20%.
19 August 2014
Dear Rupesh Ji,
Thanks for the reply.
But can you please clarify whether cloud service will fall under royalty or fees for technical service ? Since amazon web service is non resident in India and in case of non resident following services are taxable in India if it has not permanent establishment in Inida :
i) Interest
ii) Royalty
iii) Fees for technical services.
Thanks for the reply.
But can you please clarify whether cloud service will fall under royalty or fees for technical service ? Since amazon web service is non resident in India and in case of non resident following services are taxable in India if it has not permanent establishment in Inida :
i) Interest
ii) Royalty
iii) Fees for technical services.
27 July 2025
Great question! Let’s clarify the TDS treatment on payments to Amazon Web Services (AWS) USA for cloud computing services, especially from the perspective of whether the payment is considered **Royalty** or **Fees for Technical Services (FTS)** under Indian tax laws and the India-US DTAA.
---
### 1. **Nature of Cloud Computing Services:**
* Cloud computing typically involves providing access to software, storage, and computing resources over the internet.
* This can be seen as either:
* A **service** (like software-as-a-service or SaaS), or
* A **license or right to use software**.
---
### 2. **Is it Royalty or Fees for Technical Services?**
* **Royalty** (Section 9(1)(vi) of Income Tax Act) includes payments for “transfer of right to use any copyright” including software.
* **Fees for Technical Services (FTS)** (Section 9(1)(vii)) relates to payment for managerial, technical, or consultancy services.
For **cloud computing services**, Indian tax authorities generally treat such payments as **Royalty**, because the user is paying for the right to use software hosted on AWS servers.
---
### 3. **DTAA (India-US) Perspective:**
* Under the India-US DTAA, **royalty** is taxable in India at a maximum of 10% (subject to conditions).
* FTS is also taxable but typically at a higher rate, and generally, cloud computing is treated as royalty, not FTS.
---
### 4. **TDS Rate & Section:**
* TDS is to be deducted under **Section 195** on payments to non-residents.
* If PAN is provided, TDS at **10%** (plus applicable surcharge and cess) on gross payment.
* If PAN is not provided, TDS at **20%**.
---
### 5. **Important Notes:**
* Confirm whether AWS has a **Permanent Establishment (PE)** in India. If yes, payments may not attract TDS under Section 195.
* Get **Tax Residency Certificate (TRC)** and **Form 10F** from AWS for claiming DTAA benefits.
* Proper documentation is key to avoid higher TDS or penalties.
---
### Summary:
| Nature of Service | TDS Applicability | Likely Section | TDS Rate (If PAN Provided) | Remarks |
| ----------------------- | ----------------- | -------------- | -------------------------- | ----------------------------- |
| Cloud Computing Service | Yes | Section 195 | 10% | Considered Royalty under DTAA |
---
---
### 1. **Nature of Cloud Computing Services:**
* Cloud computing typically involves providing access to software, storage, and computing resources over the internet.
* This can be seen as either:
* A **service** (like software-as-a-service or SaaS), or
* A **license or right to use software**.
---
### 2. **Is it Royalty or Fees for Technical Services?**
* **Royalty** (Section 9(1)(vi) of Income Tax Act) includes payments for “transfer of right to use any copyright” including software.
* **Fees for Technical Services (FTS)** (Section 9(1)(vii)) relates to payment for managerial, technical, or consultancy services.
For **cloud computing services**, Indian tax authorities generally treat such payments as **Royalty**, because the user is paying for the right to use software hosted on AWS servers.
---
### 3. **DTAA (India-US) Perspective:**
* Under the India-US DTAA, **royalty** is taxable in India at a maximum of 10% (subject to conditions).
* FTS is also taxable but typically at a higher rate, and generally, cloud computing is treated as royalty, not FTS.
---
### 4. **TDS Rate & Section:**
* TDS is to be deducted under **Section 195** on payments to non-residents.
* If PAN is provided, TDS at **10%** (plus applicable surcharge and cess) on gross payment.
* If PAN is not provided, TDS at **20%**.
---
### 5. **Important Notes:**
* Confirm whether AWS has a **Permanent Establishment (PE)** in India. If yes, payments may not attract TDS under Section 195.
* Get **Tax Residency Certificate (TRC)** and **Form 10F** from AWS for claiming DTAA benefits.
* Proper documentation is key to avoid higher TDS or penalties.
---
### Summary:
| Nature of Service | TDS Applicability | Likely Section | TDS Rate (If PAN Provided) | Remarks |
| ----------------------- | ----------------- | -------------- | -------------------------- | ----------------------------- |
| Cloud Computing Service | Yes | Section 195 | 10% | Considered Royalty under DTAA |
---
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