TDS on internet services

since it is a contarct 194C is applicable.

 rate of Deduction is 10% with 3% Eucation cess

Ideally TDS should be deducted u/s 194J as they are providing technical service. However there is a judgement where it has been that TDS is not liable to be deducted on internet payments.

 TDS is not deductible on services using technology -- telephone charges, Internet charges, cable TV, leased lines. Payments for use of standard facilities by the public at large in which some form of technical service is inherent are not covered under section 194J. It has also been held in the case of Skycell Communications Ltd. v. Deputy CIT[2001] 251 ITR 53 (Mad.). 



Other payments outside the purview of TDS are 

(a) Statutory payments -- fees, cess, taxes,

(b) Clearing house charges, stock exchange charges, demat charges,

(c) Subscripttion to databases.