Withholding Tax on Import of Software

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 May 2010 What is applicability of with holding tax on import of software / licences via
a) Internet Download or
b) In CD /DVD

M Prabhakar Menon

M Prabhakar Menon (Expert)

26 May 2010 Where did u get this strange idea?

Querist : Anonymous

Querist : Anonymous (Querist)

26 May 2010 Kindly give some positive reply if you have any

Querist : Anonymous

Querist : Anonymous (Querist)

26 May 2010 Any one is having some idea kindly review it , it may be helpful to society at a large

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

26 May 2010 For purchase of software no TDS applicable

Querist : Anonymous

Querist : Anonymous (Querist)

03 June 2010 Dear Members , Since 8TH May ,2008 there is Service Tax on Import of Software by Internet dowloads , I am not very sure about appliacbility of with holding tax , kindly revert on this

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

03 August 2025 Hey! On withholding tax applicability on import of software/licenses, here’s the clarity:

a) Import of Software via Internet Download
If you are paying for software license or download from a foreign company, it generally qualifies as Royalty or Fees for Technical Services (FTS) under Indian Income Tax Act (depending on facts), which means TDS under Section 195 applies.

You need to deduct TDS on the gross payment made to the foreign software supplier.

However, DTAA benefits may reduce the withholding tax rate if applicable (depending on country of supplier).

The software usage rights/license fee is often considered royalty or FTS for tax purposes.

b) Import of Software via CD/DVD
The same principle applies. Whether software is delivered via physical media (CD/DVD) or electronically, payments made to non-resident suppliers for usage/license typically attract TDS under Section 195.

The key factor is whether the payment constitutes royalty or FTS under Indian law and DTAA.

Additional points:
Service Tax: Since May 2008, import of software (downloaded or physical) attracts Service Tax (now GST) on import of services. This is separate from Income Tax TDS.

You must comply with both TDS provisions and Service Tax/GST rules as applicable.

Summary Table:
Mode of Software Import TDS Applicability on Payment to Foreign Supplier Notes
Internet Download Yes, under Section 195 if payment = Royalty/FTS DTAA benefits may reduce rate
CD/DVD Yes, same as above Physical media delivery doesn't exempt TDS
Service Tax/GST Applicable on import of services Separate from income tax TDS

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