Tds on purchase of customised software

Sir,

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.

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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Yes, TDS applies to the purchase of customised software if it is treated as a royalty payment under section 194J of the Income Tax Act, 1961. In case of TDS non-deduction, the absolute cost will be disallowed under section 40(a)(ia). Regardless, if the software is treated as a capital investment, only the depreciation on that payment will be disallowed.