TDS on Standard cloud services
This query is : Resolved
Quick Summary
Challa Praveen Kumar
(Querist)
22 September 2025
Whether TDS is applicable on Standard cloud services taken from Amazon Interenet services Private Limited, if yes under which Section ? and what is the nature ? and if no, reason for not applicable.
Dhirajlal Rambhia
(Expert)
22 September 2025
For standard cloud services from Amazon Internet Services Private Limited (AISPL), which is the Indian entity of Amazon Web Services (AWS), TDS is not applicable in India. The reason is that the income from such services is not considered taxable in India under the Income Tax Act, 1961.
Dhirajlal Rambhia
(Expert)
22 September 2025
TDS (Tax Deducted at Source) is generally not applicable on standard cloud services procured from Amazon Internet Services Private Limited (AISPL) in India, as these payments are not considered "royalty" or "fees for technical services" under Indian tax law or most relevant tax treaties such as the India-USA DTAA. The principal reason is that standard cloud services do not involve transfer of technical knowledge, skill, or process to the customer—users simply consume services without acquiring or controlling underlying technology.
Dhirajlal Rambhia
(Expert)
22 September 2025
Section 195 of the Income-tax Act, 1961 requires TDS only if the sum payable to a non-resident is chargeable to tax in India.
Standard, automated cloud services such as those offered by Amazon (AWS/AISPL) are not treated as "royalty" (Sec 9(1)(vi)) or "fees for technical services" (Sec 9(1)(vii)), because:
The customer does not receive or utilize technical knowledge or know-how.
There is no transfer of copyrights, technology, or leasing of equipment—the service is provided through a service level agreement and not through the transfer of right to use any asset.
Standard, automated cloud services such as those offered by Amazon (AWS/AISPL) are not treated as "royalty" (Sec 9(1)(vi)) or "fees for technical services" (Sec 9(1)(vii)), because:
The customer does not receive or utilize technical knowledge or know-how.
There is no transfer of copyrights, technology, or leasing of equipment—the service is provided through a service level agreement and not through the transfer of right to use any asset.
Dhirajlal Rambhia
(Expert)
22 September 2025
Judicial & CBDT Perspective
Tribunal rulings, including those by ITAT Delhi and Mumbai, have specifically clarified that such payments for standard and automated cloud services do not attract TDS obligations.
If the Indian service provider/entity is making payment to AISPL, which is an Indian entity, then the question of Section 195 does not arise (applicable only to non-residents). TDS under Section 194J or 194C is not applicable unless specifically notified or unless the payment can be distinctly established as "fee for technical services"—which is generally not the case for standard cloud usage.
Tribunal rulings, including those by ITAT Delhi and Mumbai, have specifically clarified that such payments for standard and automated cloud services do not attract TDS obligations.
If the Indian service provider/entity is making payment to AISPL, which is an Indian entity, then the question of Section 195 does not arise (applicable only to non-residents). TDS under Section 194J or 194C is not applicable unless specifically notified or unless the payment can be distinctly established as "fee for technical services"—which is generally not the case for standard cloud usage.
Dhirajlal Rambhia
(Expert)
22 September 2025
This position has been affirmed by various court rulings, including a landmark Delhi High Court decision. Here's a breakdown of the key legal arguments:
Not Royalty: The courts have held that a customer of standard cloud services, like those offered by AISPL, is merely given a right to access and use the services on a non-exclusive basis. They do not have possession or control over the underlying equipment, servers, or software. The payment is for the service itself, not for the "use of equipment" or the "right to use" any intellectual property (IPR) like copyrights or trademarks. Therefore, the payment doesn't fall under the definition of "royalty" as per Section 9(1)(vi) of the Income Tax Act.
Not Fees for Technical Services (FTS): The services provided by AISPL are considered standardized and automated. They do not involve the "making available" of any technical knowledge, skill, know-how, or process to the customer. While AISPL may offer technical support, this is considered incidental to the core service and does not transfer any technology that the customer can then use on their own. Thus, the payment is not classifiable as FTS under Section 9(1)(vii) of the Act.
Not Royalty: The courts have held that a customer of standard cloud services, like those offered by AISPL, is merely given a right to access and use the services on a non-exclusive basis. They do not have possession or control over the underlying equipment, servers, or software. The payment is for the service itself, not for the "use of equipment" or the "right to use" any intellectual property (IPR) like copyrights or trademarks. Therefore, the payment doesn't fall under the definition of "royalty" as per Section 9(1)(vi) of the Income Tax Act.
Not Fees for Technical Services (FTS): The services provided by AISPL are considered standardized and automated. They do not involve the "making available" of any technical knowledge, skill, know-how, or process to the customer. While AISPL may offer technical support, this is considered incidental to the core service and does not transfer any technology that the customer can then use on their own. Thus, the payment is not classifiable as FTS under Section 9(1)(vii) of the Act.
Dhirajlal Rambhia
(Expert)
22 September 2025
Good luck..
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