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Is tds applicable for making remittance to usa for software

ashish (Business Development) (25 Points)

23 January 2015

Hello,

We are software trader (Re-seller), Purchasing software from USA and supplying the software in India.

We want to make our first remittace to the principal compnay in USA, We need to provide form 15CA & 15CB to the bank.

Our question, Is TDS is applicalbe for making remittace to USA ?

Awaiting your kind guidance

Thank you

Ashish

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3 Replies

CA Pankaj Kr Agrawal (@Helping Hand) (2143 Points)
Replied 29 January 2015

Hi Ashish,

Here Sec 194J shall apply

Extract of Section

no deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:-

Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where-

(i) the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,

(ii) tax has been deducted-

(a) under section 194J on payment for any previous transfer of such software; or
(b) under section 195 on payment for any previous transfer of such software from a non-resident, and
(iii) the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.

In your Case:-

TDS on Purchase of Software

1) TDS u/s 195 shall apply on payment to non resident person.

TDS on sales of Software

1) You shall give a declaration that the tax has been deducted along with your Permanent Account Number.

ashish (Business Development) (25 Points)
Replied 03 February 2015

Dear Mr. Pankaj,

Thanks for your valualbe reply to us.

We have noted that

1 TDS is applicable so How much it is ?

2 TDS on sales of Software 1) You shall give a declaration that the tax has been deducted along with your Permanent Account Number

Can give us more input on second point ?

Awaiting your valauble reply

Thank you

Raphael (Chartered Accountant) (214 Points)
Replied 04 February 2015

Are you purchasing software in physical form ? or are you paying royalty for the number oflicenses issued.

If purchases is in physical form TDS does not apply. In the other case, royalty, the issue will be looked on a case to case basis and provisions of DTAA along with income tax will have to be studied.

15CA/CB is required to be produced for even purchases. But in each case TDS does not apply. If it is purely in the form of purchase and the seller does not have a permenant establishment in india, then TDS will not apply while issuing 15CA/CB.