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Tds on software support service

sai ram (article trainee) (53 Points)

25 June 2015

An Indian company is availing software support services from US software technology company

For that Indian Company is paying $15000 as annual support charges.

Does Indian company is liable to deduct TDS for payment towards support charges

If so what is the rate ? and under what section ?

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3 Replies

Deepak Tapse (Accounts Manager - Taxation) (1771 Points)
Replied 25 June 2015

Yes, TDS is to be deducted u/s 195 as per DTAA or I.Tax which is beneficiary to supplier. If PAN not available then 20% or as per Rate whichever is higher.

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Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 25 June 2015

Hi Sai,

If Foreign company is having PE in India, then TDS needs to be deducted under article 12 of the US DTAA agreement @ 15% provided foreign company submitted their TRC in USA and also PAN in India. Following are the implication :

1) Foreign company doesnt provided TRC of USA and PAN in India : DTAA benefit cannot availed. Therefore, TDS rate would be 25% + SC + EC (Refer enclosed sheet)

2) Foreign company doesnt provided TRC of USA but having PAN in India : DTAA benefit cannot availed. Therefore, TDS rate would be 25% + Surcharge + Edu. Cess (Refer enclosed sheet)

3) Foreign company provided TRC of USA but not having PAN in India : DTAA benefit can be availed. However due to non availability of PAN, TDS rate would be 20% + Surcharge + Edu. Cess

4) Foreign company provided TRC of USA and also having PAN in India : DTAA benefit can be availed. TDS rate would be flat 15%

Please refer article 12 of the India - USA DTAA agreement for further details.

If foreign company doesnt have PE in India, No TDS applicable.

Thanks and Regards,

Manoj B. Gavali

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