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Hemanth Khatokar (CA-final)     14 September 2012

Tds on purchase of customised software


Please Let me know whether TDS is applicable on purchase of customised software.

If yes then under which section the amount should be disallowed in case of non-deduction of tax and whether total expenditure to be disallowed or only depreciation to be disallowed.




 2 Replies


HITESH GORI (CA in practice)     14 September 2012


in purchase of software u need to deduct tax u/s. 194 J under head fees for professional and technical services.

but disallowance is subject to capitalise or revenue. many judicial decisions are clearified that software may be revenue expenditure, in this situation entire amount will be disallowed.

if it is capitlised there is a drafting error in law, in absense of any section for disallowance for depriciation u can claim depriciation also.

In this scenario disallowance is governed by 40 series and in this series section for diallowance of depriciation is not added by department.

I hope this is useful to u.




Ravi Kumar Mahaur

Ravi Kumar Mahaur (CA-FINAL)     16 September 2012

this is covered u/s 194J (professional and technical services) so you are reqired to deduct TDS @ 10% if the payment exceeds Rs.30,000/-p.a. If the tds is not deducted then such expenditure will be disallowed u/s 40(a) of income tax act

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