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Tds rate on purchase of computer software

Neeraj Kumar Saini (Accountant) (36 Points)

08 August 2011

WE HAVE PURCHASE A SOFTWARE LICENCE AMOUNTING 10 LACS PARTY CHARGES VAT & SERVICE TAX BOTH.

SUGGEST WE HAVE TO DEDUCT TDS ON BILL OR NOT?

AND WHAT IS THE RATE OF TDS

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13 Replies

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 08 August 2011

though it depends on nature of software.. but mostly the tds to be deducted

Mihir (Wealth Manager) (5293 Points)
Replied 08 August 2011

TDS u/s 194J (royalty) could apply here.

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 08 August 2011

Yes, you need to deduct tds on purchase on software if service tax is charged on software.

Nishant Alok (Chartered Accountant) (97 Points)
Replied 08 August 2011

Agree with CA Navin Jain,but you have to see whether service tax has been charged on complete bill amount or part of the amount.TDS is to be deducted on only that amount for which service tax has been charged.

Rohit Singh Bhandari (article) (26 Points)
Replied 08 August 2011

tds will be deducted on only service charges.

& the kind of service provided is to be seen to see which kind of TDS section is applicable.

CA. MUKESH SARAN (PARTNER) (31 Points)
Replied 11 August 2011

First you decide nature of software "On the Shelf" or "Off the Shelf" In case of "On the shelf" there is no service tax only VAT will be applicable and No TDS is required to be deducted as it is simply a "Purchase". If it is "Off the Shelf" then it means that has been "tailored" according to your specifications and then Service tax is applicable on the part of service charges and VAT is applicable on the Other part of the cost of software. Then TDS will be applicable only on the amount on which service tax has been charged and it will be under "Providing Professional/Technical Service" i.e. 194J.

2 Like

madhu (EXECUTIVE-ACCOUNTS) (22 Points)
Replied 26 September 2011

i think, tds will be deducted only for service charges, other wise tds is applicable

DIWAKAR SHARMA (asst. auditor ) (21 Points)
Replied 12 December 2011

We have client in Brazil country and we have purchase software for them from other country, and that software is used in Brazil not in India but amount paid by India Company. So would like to ask you whether it attract TDS or NOT, if yes how much %? And whether how much % of amount we can claim it back?

Contact me:- diwakarsharma1989 @ yahoo.com

Waiting for reply

Regards,

Diwakar Sharma

Hemant Kumar (Accounts Manager MBA (Fin) CMA*) (6450 Points)
Replied 19 December 2011

If Service tax charged on the software then its nature to giving a service to your company, hence you should have to deduct TDS under sec. 194C. i.e. 2%. Request to Members please correct if i am wrong.

1 Like

Hemant Kumar (Accounts Manager MBA (Fin) CMA*) (6450 Points)
Replied 19 December 2011

If Service tax charged on the software then its nature to giving a service to your company, hence you should have to deduct TDS under sec. 194C. i.e. 2%.

Request to Members please correct if i am wrong.

Satish (Sr. Executive Purchase) (21 Points)
Replied 14 May 2012

Hello,

Is there any TDS applicable in case we download the SW from NET or we get the SW licenses by mail from foreign supplier? If yes, pls. let me know the %? also let me know if there is any conditions like PAN number available then low % of TDS and all that.

Aabha Lal (internal auditor) (25 Points)
Replied 21 June 2012

Software (downloaded from net) which is freely available 'On the shelf' doesn't attract neither Service tax and hence nor attract TDS on it.

However, if it is purchased from a vendor who has made it specifically per the request of purchaser, then it is a service and hence service tax is applicable. In this case, TDS will also be deducted u/sec 194J since it falls in prof/ technical service clause.

It is to be noted that from July 2012 onwards, TDS is not applicable on Software Re-sale which you can study in detail with following link

https://www.taxmann.com/breakingnews.aspx?sid=11045&t=1&c=1

1 Like

tannu (t) (23 Points)
Replied 01 August 2012

According to me, tds would be deducted on sum inclusive of service tax and vat under section 194J but only if the software is purchased from a MNC or if it is purchased from a Non-Resident, then tax would be deducted U/S 195 @ 20% because then only it comes under royalty. If i am wrong on this please correct.