TDS applicable on Software Renewal Charge

This query is : Resolved

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TDS on software renewal is debatable. Vendor may treat it as purchase, but it can be royalty under section 194J at 10 percent. If covered by CBDT Circular 21 2012 and declaration given, TDS may not apply.

CMA Sagar Das

CMA Sagar Das (Querist)
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07 February 2024 The vendor charge Annual renewal charge of software purchase (SAC 997331). Vendor is saying that it is purchase of software and TDS is not applicable on it. Please clarify whether we have to deduct TDS or not?

CA. Bhavik P. Chudasama

CA. Bhavik P. Chudasama (Expert)
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07 February 2024 Vendor is correct because its purchase of goods/services and do not fall under TDS Section, this is my opinion based on the information provided

CMA Sagar Das

CMA Sagar Das (Querist)
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07 February 2024 Can you please share any judgement or case no?

PURUSOTTAM PANDA

PURUSOTTAM PANDA (Expert)
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15 December 2024 This above said transaction is well within the ambit of Section 9(1)(vi), consequently, subject to TDS u/s 194J @ 10% as Royalty.

However, there is an exception as specified in CBDT Circular No.21/2012 dt. 13.06.2012. If your vendor falls under this exception, then the vendor needs to submit a declaration as per the requirement of the said Circular.

If no declaration submitted either in the invoice or separately, TDS will be applicable.

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