TDS of Software Renewal or Software Subscription

Neither 2% nor 10% may apply. Check Notf 21/2012 first:

• Payment to a resident vendor for off-the-shelf software is exempt from TDS under Sec 194J (CBDT Notf 21/2012) if:

(a) the software is acquired in a subsequent transfer without modification

(b) tax was deducted on the earlier payment (under 194J or 195)

(c) the vendor furnishes PAN and a declaration to that effect.

Ask the vendor for this declaration, not a "No TDS certificate".

• Without the declaration, the payment is royalty for software, Sec 194J at 10% (royalty is in the 10% limb, not the 2% technical-services limb). Threshold Rs 50,000 a year (from 1 April 2025).

• Pure SaaS or cloud subscripttion (no software licence delivered) is arguably a standard facility, not royalty. Many deductors still apply 10% under 194J to be safe.

• Foreign vendor: Sec 195, generally no TDS after Engineering Analysis (SC 2021) with TRC + Form 10F. GST is payable under RCM.

• From 1 April 2026: Sec 393 of the Income-tax Act, 2025 (the Notf 21/2012 equivalent continues under the new Rules).