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TDS grossup on Import of software
we have been purchasing lot of softwares from foreign countries where supplier dont have PAN in India and hence as a organization we have been bearing additional 25% tds gross up on every purchase..what is the right industry practice?? also is there is any compliance issue of doing so..
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Summary: You may not need to deduct TDS or "gross up" at all if the software is for standard internal use, per the Supreme Court's ruling on software imports. If the payment is legally classified as a royalty, you must gross up at the "rates in force" (or DTAA rate if applicable), rather than defaulting to a 20% rate. Consult a qualified Chartered Accountant to review your specific software agreements to confirm if your current TDS practice is necessary.
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