TDS on purchase of application Software

Save Share

This query is : Resolved

Quick Summary

This discussion explores the correct TDS (Tax Deducted at Source) rate applicable when purchasing application software. The query centres on whether software falls under 'Professional Services' (10% TDS) or 'Technical Services' (2% TDS) as per Section 194J of the Finance Bill 2020 amendments. While one perspective suggests it's a technical service because software is developed by technically qualified individuals, another viewpoint, citing Wipro case laws, argues for the professional services rate.

SEEMA CHINEY

SEEMA CHINEY (Querist)
Follow

15 May 2020 As we are aware that there is an amendment in the Finance Bill 2020 reg rate of TDS u/sec 194J Professional @ 10% and Technical services @ 2%.
Is purchase of software covered under Professional or Technical services?
Technically expert person can develop a software so I think it shall cover under "Technical" services. Please advice.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

15 May 2020 It will fall under technical service 2% TDS applicable.

SEEMA CHINEY

SEEMA CHINEY (Querist)
Follow

23 May 2020 Thanks Seetharaman Sir..!!
Our Internal Auditor says to deduct 10% u/sec 194J. They have quoted case laws of Wipro.
Request you to pls give explanation to your opinion.
How can we define it as Technical service? I think Technically qualified person is able to develop a software, but may I know any other reason pls?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

23 May 2020 I agree with you a technical person not a professional defined under section 44AA can develop a software.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now